SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CORT BUSINESS SERVICES CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6 (i)(3).
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:1
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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CORT(R)
BUSINESS SERVICES
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held May 14, 1997
To the Stockholders of CORT BUSINESS SERVICES CORPORATION:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of the Stockholders of
CORT BUSINESS SERVICES CORPORATION will be held at the Holiday Inn Fair Oaks,
Fairfax, Virginia, on Wednesday, May 14, 1997, at 2:00 p.m., local time, for the
purpose of:
(1) Electing seven directors (Proposal No. 1);
(2) Approving the appointment of independent accountants of the
Corporation for the fiscal year ending December 31, 1997 (Proposal No.
2);
(3) Approving an amendment to the Corporation's Restated Certificate of
Incorporation to increase the number of authorized shares of Common
Stock (Proposal No. 3);
(4) Approving the adoption of the Amended and Restated 1995 Stock-Based
Incentive Compensation Plan (Proposal No. 4);
(5) Approving the adoption of the 1997 Directors Stock Option Plan
(Proposal No. 5); and
(6) Transacting such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 28, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting and any adjournments thereof; only holders of record of
stock of the Corporation on that date are entitled to notice of and to vote at
the meeting and any adjournments. A list of stockholders will be available at
the time and place of the meeting and, during the 10 days prior to the meeting,
at the office of the Corporate Secretary, 4401 Fair Lakes Court, Suite 300,
Fairfax, Virginia 22033.
It is important that your shares be represented at the meeting regardless
of the number of shares that you own. Please complete and sign the enclosed
proxy card, which is being solicited by the Board of Directors of the
Corporation, and return it in the enclosed postage pre-paid envelope as soon as
you can, whether or not you plan to attend in person.
Respectfully,
FRANCES ANN ZIEMNIAK
Vice President of Finance, CFO
& Assistant Secretary
Dated: March 31, 1997
4401 FAIR LAKES COURT, SUITE 300, FAIRFAX, VIRGINIA 22033
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CORT(R)
BUSINESS SERVICES
4401 FAIR LAKES COURT, SUITE 300
FAIRFAX, VIRGINIA 22033
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PROXY STATEMENT
General Information
This proxy statement is furnished in connection with the solicitation of
proxies to be used at the annual meeting of stockholders of CORT Business
Services Corporation (the "Corporation" or the "Company") to be held on May 14,
1997 at 2:00 p.m., local time, and at any adjournment thereof. The form of proxy
and this proxy statement are being mailed to stockholders on or about March 31,
1997. The Corporation's annual report to stockholders, including financial
statements, accompanies this notice and proxy statement, but is not incorporated
as part of the proxy statement and is not to be regarded as part of the proxy
solicitation material.
Proxies are solicited by the Board of Directors of the Corporation in order
to provide every stockholder an opportunity to vote on all matters scheduled to
come before the meeting, whether or not he or she attends the meeting in person.
When the enclosed proxy card is returned properly signed, the shares represented
thereby will be voted by the proxy holders named on the card in accordance with
the stockholder's directions. You are urged to specify your choices by marking
the appropriate boxes on the enclosed proxy card. If the proxy is signed and
returned without specifying choices, the shares will be voted as recommended by
the Board of Directors. A stockholder giving a proxy may revoke it at any time
before it is voted at the meeting by notifying the Corporate Secretary in
writing of such revocation, or by submitting another proxy bearing a later date.
If you do attend, you may, if you wish, vote by ballot at the meeting, thereby
canceling any proxy vote previously given.
If a stockholder wishes to give a proxy to someone other than those
designated on the proxy card, he or she may do so by crossing out the names of
the designated proxies and by then inserting the name of another person(s). The
signed proxy card should be presented at the meeting by the person(s)
representing the stockholder.
On March 14, 1997, there were 12,777,398 shares of Common Stock issued and
outstanding, each of which is entitled to one vote.
The holders of a majority of the outstanding shares must be present in
person or by phone at the annual meeting in order to constitute a quorum for the
purpose of transacting business at the meeting. Except for the election of
directors, the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock present in person or by proxy at the meeting and entitled
to vote on the proposals is required to ratify and approve the proposals.
Directors are elected by a plurality of the votes cast by written ballot.
Abstentions are counted in tabulations of the votes cast by stockholders on the
proposals and will have the effect of a negative vote. Brokers who hold shares
in street name for customers have the authority to vote only on certain routine
matters in the absence of instruction from the beneficial owners. A broker
non-vote occurs when the broker does not have the authority to vote on a
particular proposal. Under applicable Delaware law, broker non-votes will not be
counted for purposes of determining whether any proposal has been approved.
Solicitation of proxies is made on behalf of the Board of Directors of the
Corporation, and the cost of preparing, assembling, and mailing the notice of
annual meeting, proxy statement, and form of proxy will be borne by the
Corporation. In addition to the use of the mail, proxies may be solicited by
directors, officers and regular employees of the Corporation, without additional
compensation, in person or by telephone or facsimile.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Corporation's Board of Directors consist of seven directors, whose
terms expire annually.
Unless otherwise specified by the stockholders, the shares represented by
the proxies will be voted for the seven nominees for directors listed below.
Keith E. Alessi, Paul N. Arnold, Bruce C. Bruckmann, Michael A. Delaney, Charles
M. Egan, Gregory B. Maffei, and James A. Urry are nominated for terms which will
expire at the 1998 Annual Meeting of Stockholders. Each nominee for director has
consented to his nomination as a director and, so far as the Board and
Management are aware, will serve as a director if elected. The names and
biographical summaries of the seven persons who have been nominated to stand for
election at the 1997 Annual Meeting of Stockholders appear below.
MR. KEITH E. ALESSI Director Since October 1993
Mr. Alessi, age 42, is Chairman, Chief Executive Officer and a Director of
Jackson Hewitt Inc. Mr. Alessi was Vice Chairman and Chief Financial
Officer of Farm Fresh, Inc. from June 1994 through June 1996. He had
previously served in various executive capacities, including President,
with Farm Fresh from 1988 to 1992. Mr. Alessi was Chairman and Chief
Executive Officer of Virginia Supermarkets, Inc., from 1992 to 1994. Mr.
Alessi is also a Director of Farm Fresh, Inc. and Shoppers Food Warehouse,
Inc.
MR. PAUL N. ARNOLD Director Since March 1993
Mr. Arnold, age 50, has been the Chief Executive Officer and a Director of
the Company since July 1992. Mr. Arnold has been with the Company and
Mohasco Corporation, its former parent, for 28 years and has held group
management positions within the Company since 1976.
MR. BRUCE C. BRUCKMANN Director Since March 1993
Mr. Bruckmann, age 43, is currently Managing Director of Bruckmann, Rosser,
Sherrill & Co., Inc. Mr. Bruckmann was a Vice President of Citicorp Venture
Capital Ltd., which is an affiliate of the Company, through 1993 and a
Managing Director from 1993 through 1994. He is also a Director of Mohawk
Industries, Inc., AmeriSource Health Corporation, Chromcraft-Revington,
Inc., Jitney-Jungle Stores of America, Inc. and Anvil Knitwear, Inc.
MR. MICHAEL A. DELANEY Director Since May 1995
Mr. Delaney, age 42, has been a Vice President of Citicorp Venture Capital
Ltd., which is an affiliate of the Company, since 1989. From 1986 through
1989 he was Vice President of Citicorp Mergers and Acquisitions. Mr.
Delaney is also a Director of Aetna Industries, Inc., AmeriSource Health
Corporation, Ballentrae Corporation, CLARK Material Handling Corporation,
Delco Remy International, Inc., Enterprise Media Inc., GVC Holdings, JAC
Holdings, IKS Corporation, Palomar Technologies, Inc., SC Processing, Inc.,
MSX International and Triumph Holdings, Inc.
MR. CHARLES M. EGAN Director Since September 1993
Mr. Egan, age 60, has been with the Company since the acquisition of
General Furniture Leasing Company in September 1993. Mr. Egan joined
General Furniture Leasing Company in 1989 and became its President and
Chief Executive Officer in 1992. From 1985 to 1989, Mr. Egan was Executive
Vice President of Mohasco Corporation. Mr. Egan was President of CORT
Furniture Rental Corporation from 1980-1985.
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MR. GREGORY B. MAFFEI Director Since November 1995
Mr. Maffei, age 36, is Vice President, Corporate Development and Treasurer
of Microsoft Corporation. He joined Microsoft in April 1993 and has served
as Treasurer since 1994. Before joining Microsoft, he was self-employed
from September 1992 to March 1993, serving as a consultant for various
companies including Microsoft. From January 1991 to August 1992, he served
as Executive Vice President and Chief Financial Officer of Pay 'N Pak
Stores, Inc. Prior thereto, Mr. Maffei was a Vice President of Citicorp
Venture Capital Ltd., which is an affiliate of the Company. Mr. Maffei is
also a Director of Mobile Telecommunications Technologies Corporation
(Mtel) and Citrix Systems, Inc.
MR. JAMES A. URRY Director Since March 1993
Mr. Urry, age 43, has been with Citibank, N.A. since 1981 serving as a Vice
President since 1986. He has been a Vice President of Citicorp Venture
Capital Ltd., which is an affiliate of the Company, since 1989. He is also
a Director of AmeriSource Health Corporation, CLARK Material Handling
Corporation, Hancor Holding Corporation, IKS Corporation, Palomar Products
Inc., Recreation Vehicle Product Company and York International
Corporation.
Although the Board of Directors and Management do not contemplate that any
of the nominees will be unable to serve, in the event that prior to the meeting
any of the nominees become unable to serve because of special circumstances, the
shares of stock represented by the proxies will be voted for the election of a
nominee who shall be designated by the Board.
The Board of Directors recommends that stockholders vote FOR the election
of Messrs. Alessi, Arnold, Bruckmann, Delaney, Egan, Maffei and Urry.
PROPOSAL NO. 2
APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Unless otherwise specified by the stockholders, the shares of stock
represented by the proxies will be voted for the approval of the appointment of
KPMG Peat Marwick LLP, a firm of independent accountants, to audit and report
upon the financial statements of the Corporation for the fiscal year 1997. KPMG
Peat Marwick LLP has been the independent accountants of CORT Furniture Rental
Corporation since 1972 and the Company since its formation in March 1993. In the
opinion of the Board of Directors and Management, KMPG Peat Marwick LLP is well
qualified to act in this capacity.
A representative of KPMG Peat Marwick LLP is expected to be present at the
annual meeting. The representative will have the opportunity to make a statement
if he or she desires to do so and will be available to respond to appropriate
questions. The Corporation has been advised by KPMG Peat Marwick LLP that the
firm has no financial interest, direct or indirect, in the Corporation, other
than serving as independent accountants during the period stated.
The Board of Directors recommends that stockholders vote FOR the approval
of the appointment of KPMG Peat Marwick LLP as independent accountants.
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PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has approved and recommends that the stockholders
authorize an amendment to the first paragraph of Article 4 of the Company's
Restated Certificate of Incorporation (the "Charter") to increase the number of
shares of each class of Common Stock, par value $.01 per share (together, the
"Stock"), which the Company is authorized to issue from 15,500,000 to 20,000,000
per class.
The Company's authorized capital stock currently consists of 15,500,000
shares of Common Stock, par value $.01 per share, and 15,500,000 shares of Class
B Common Stock, par value $.01 per share. All shares of Common Stock and Class B
Common Stock are identical and entitle the holders to the same rights and
privileges, except that the Class B Common Stock has no voting rights. No shares
of Class B Common Stock have been issued or are outstanding. As of March 14,
1997, 12,777,398 shares of Common Stock had been issued, all of which were
outstanding and none were held in the treasury of the Company. Therefore, on
March 14, 1997, there were 2,722,602 unissued shares of Common Stock available
for issuance without further action by the stockholders. The Common Stock and
Class B Common Stock are each convertible into the other class of stock on a
share for share basis, subject to certain limitations. As a result, the Company
has reserved a number of unissued shares of each class equal to the number of
outstanding shares of the other class.
The additional shares of Stock for which authorization is sought would be a
part of the existing classes of Stock and, if and when issued, would have the
same rights and privileges as the shares of Stock currently outstanding. The
shares of Stock now outstanding do not entitle the holders to preemptive or
subscription rights to purchase additional shares of Stock. The amendment would
make no change in any respect with regard to the rights and privileges of shares
of Stock. The text of the proposed amendment is set forth in Appendix A.
Reasons for and Effects of the Amendment
The Company currently has no plans, agreements or understandings for the
issuance of additional shares of Stock except upon conversion of outstanding
convertible securities and as required under existing director stock option,
employee compensation and stock option plans. The Board believes that having
additional authorized shares of Stock available for issuance as the need may
arise will give the Company more financial flexibility, without the expense and
delay of a special stockholders' meeting, in connection with these possible
issuances and potential equity financings, future opportunities to expand the
business through investments or acquisitions, stock dividends and splits, new
management incentive and employee benefit plans and sales to employee savings
plans. The additional shares of Stock will be available without further action
by the stockholders, unless such action is required by applicable law, the rules
of any stock exchange on which the Company's securities may then be listed or
the Company's Charter.
Neither the Board nor management is considering the use of Stock to assume
control of the Company or to hinder an attempt to remove the incumbent
management of the Company, and neither is aware of any specific efforts to
accumulate Stock, to obtain control of the Company or to remove management.
The proposed increase in the number of authorized shares of Stock is not
intended to deter or prevent a change in control. Moreover, the Company has
elected not to be subject to Section 203 of the Delaware General Corporation
Law, rendering such anti-takeover statute inapplicable to the Company. Had the
Company not so elected, Section 203 would generally preclude a person who
acquires fifteen percent (15%) or more of the voting stock of the Company from
effecting a merger or certain other business combinations with the Company for
three (3) years after such acquisition without the prior approval of the Board.
Although the Board has no current intention of doing so, the Company's
authorized but unissued Stock could be issued in one or more transactions that
would make a takeover of the Company more difficult or costly, and therefore,
less likely. Issuing additional shares of Stock would also have the effect of
diluting the stock ownership of persons seeking to obtain control of the
Company. The proposed amendment to the Charter is not being recommended in
response to any specific effort of which the Company is aware to obtain control
of the Company, nor is the Board currently proposing to stockholders any
anti-takeover measures.
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The New York Stock Exchange, on which the issued shares of the Company's
Common Stock are listed, currently requires, as a precondition for listing any
additional shares, the approval of the stockholders prior to any issuances by
the Company of Stock, or securities convertible into or exercisable for Stock,
having voting power at least equal to twenty percent (20%) of the aggregate
voting power outstanding prior to the issuance of such stock or which would
otherwise result in a change in control of the Company.
The Board of Directors recommends that stockholders vote FOR this proposal
to amend the Charter as set forth above.
PROPOSAL NO. 4
APPROVAL OF THE AMENDED AND RESTATED
1995 STOCK-BASED INCENTIVE COMPENSATION PLAN
In 1995, the Board of Directors adopted and the Company's stockholders
approved the 1995 Stock-Based Incentive Compensation Plan (the "Original 1995
Employee Plan"). The Original 1995 Employee Plan became effective October 31,
1995.
Awards under the Original 1995 Employee Plan may be made to officers and
key employees of the Company in the form of 1995 Plan Stock Options, Restricted
Stock, Deferred Stock and Stock Appreciation Rights (each, an "Award"). The
aggregate maximum number of shares of Common Stock available for Awards under
the Original 1995 Employee Plan is 577,427 shares. No Awards can be made under
the Original 1995 Employee Plan after October 31, 1997. On March 18, 1997, the
last reported sales price of the Common Stock on the New York Stock Exchange was
$24.875.
Proposed Amended and Restated 1995 Employee Plan
The Board of Directors has approved, subject to stockholder approval, the
Amended and Restated 1995 Employee Plan (the "Amended 1995 Employee Plan") which
amends and restates the Original 1995 Employee Plan to provide for (i) an
increase in the total number of shares of Common Stock available as Awards under
the Original 1995 Employee Plan from 577,427 to 1,210,000, (ii) an extension of
the expiration date of the Original 1995 Employee Plan to the date immediately
preceding the tenth anniversary of the effective date of the Amended 1995
Employee Plan and (iii) the transferability of certain 1995 Plan Stock Options,
whether awarded under the Original 1995 Employee Plan or the Amended 1995
Employee Plan, by a plan participant to certain family members of such
participant and trusts established for the benefit of such family members.
Proposal No. 4 seeks stockholder approval of the Amended 1995 Employee Plan.
The Board of Directors considers the amendments necessary for the
attraction and retention by the Company of valued employees by ensuring that
additional Awards beyond those authorized under the Original 1995 Employee Plan
can be made and that holders of 1995 Plan Stock Options, whether awarded under
the Original 1995 Employee Plan or the Amended 1995 Employee Plan, may transfer
such options for estate tax planning purposes.
Summary of the Proposed Amended and Restated 1995 Employee Plan
The following summary describes features of the Amended 1995 Employee Plan.
This summary is qualified in its entirety by reference to the specific
provisions of the Amended 1995 Employee Plan, the full text of which is set
forth as Appendix B.
Purpose. The purpose of the Amended 1995 Employee Plan is to assist the
Company, its subsidiaries and affiliates in attracting and retaining valued
employees by offering them a greater stake in the Company's success and a closer
identity with it, and to encourage ownership of the Company's stock by such
employees.
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Administration. The Amended 1995 Employee Plan will be administered by a
committee of three or more persons designated by the Board of Directors (the
"Compensation Committee"), all of whom are Non-Employee Directors and Outside
Directors (as such terms are defined in the Amended 1995 Employee Plan). The
Compensation Committee has the power and authority to, among other things, (i)
interpret and administer the Amended 1995 Employee Plan, (ii) adopt regulations
for carrying out the Amended 1995 Employee Plan, (iii) make changes in such
regulations as it shall, from time to time, deem advisable, (iv) select the
employees to whom Awards will be granted (each a "Participant" and collectively,
"Participants"), (v) determine the type and amount of Awards to be granted to
each Participant and (vi) establish the terms and conditions of Awards under the
Amended 1995 Employee Plan.
Eligibility. Any officer or other key employee of the Company, its
subsidiaries or affiliates, including a director who is such an employee, is
eligible to participate in the Amended 1995 Employee Plan. As of March 18, 1997,
there were approximately 100 employees eligible to participate in the Original
1995 Employee Plan, of whom approximately 85 were Participants. Participation in
the Amended 1995 Employee Plan is at the discretion of the Compensation
Committee and shall be based upon an employee's present and potential
contributions to the success of the Company, its subsidiaries and affiliates and
such other factors as the Compensation Committee deems relevant.
Awards under the Amended 1995 Employee Plan. Awards under the Amended 1995
Employee Plan may be in the form of 1995 Plan Stock Options, Restricted Stock,
Deferred Stock and Stock Appreciation Rights.
Deferred and Restricted Stock
-----------------------------
The Compensation Committee may grant shares of Common Stock in the form of
either Deferred Stock or Restricted Stock. In a Deferred Stock award, the
Company agrees to deliver, subject to certain conditions, a fixed number of
shares of Common Stock at the end of a specified deferral period or periods.
During such period, the Participant has no rights as a stockholder with respect
to any such shares. Amounts equal to any dividends declared during the deferral
period with respect to such Deferred Stock will either be paid to the
Participant, reinvested in additional shares of Deferred Stock or otherwise
reinvested, as determined by the Compensation Committee at the time of the
award. Shares of Common Stock awarded pursuant to a Deferred Stock award shall
be issued at the end of a deferral period as specified in the Deferred Stock
agreement evidencing such Award, subject to adjustment by the Compensation
Committee.
In a Restricted Stock award, the Compensation Committee grants to a
Participant shares of Common Stock that are subject to certain restrictions,
including forfeiture of such stock upon the happening of certain events. During
the restriction period, holders of Restricted Stock have the right to receive
dividends from and to vote the shares of Restricted Stock. Shares of Common
Stock awarded pursuant to a Restricted Stock award shall be issued on the grant
date, held in escrow by or on behalf of the Company and delivered to the
Participant at the end of a restriction period as specified in the Restricted
Stock agreement evidencing such Award, subject to adjustment by the Compensation
Committee.
1995 Plan Stock Options
-----------------------
1995 Plan Stock Options may be either incentive stock options ("ISOs") or
non-qualified stock options ("Non-Qualified Options"). ISOs are intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Unless a 1995 Plan Stock
Option is specifically designated at the time of grant as an ISO, 1995 Plan
Stock Options will be Non-Qualified Options. No 1995 Plan Stock Option is
exercisable sooner than six months from the date granted.
Stock Appreciation Rights
-------------------------
The Compensation Committee may grant stock appreciation rights ("SARs") in
tandem with all or a portion of a related 1995 Plan Stock Option under the
Amended 1995 Employee Plan (a "Tandem SAR") or may grant SARs separately (a
"Freestanding SAR"). Each SAR entitles the holder to receive payment in cash, in
shares
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of Common Stock, Restricted Stock or Deferred Stock, or any combination thereof,
as determined by the Compensation Committee, equal to the excess of the fair
market value on the date of exercise of the shares of Common Stock covered by
the SAR over the base price of the SAR. The base price of a Tandem SAR is the
option price under the related 1995 Plan Stock Option. The base price of a
Freestanding SAR is at least 100% of the fair market value of the Common Stock
on the date of grant of the Freestanding SAR. A Tandem SAR may be granted either
at the time of the grant of the 1995 Plan Stock Option or at any time thereafter
during the term of the option and is exercisable only to the extent that the
related 1995 Plan Stock Option is exercisable. No SAR is exercisable sooner than
six months from the date granted.
The exercise of either a Tandem SAR or a 1995 Plan Stock Option related to
a Tandem SAR, as to some or all of the shares of Common Stock covered by such
grant, automatically cancels to the extent of the number of shares of Common
Stock actually covered by such exercise, the number of shares covered
respectively by the related 1995 Plan Stock Option or Tandem SAR.
Exercise Price. The exercise price of 1995 Plan Stock Options will be
determined by the Compensation Committee, although the exercise price of an ISO
shall be at least 100% of the fair market value of a share of Common Stock on
the date the ISO is granted, or at least 110% of the fair market value of a
share of Common Stock on the date the ISO is granted if the receiving
Participant owns, directly or indirectly, shares constituting more than 10% of
the total combined voting power of all classes of capital stock of the Company
(a "Ten Percent Holder").
Form of Consideration. Upon the exercise of a 1995 Plan Stock Option, the
Participant shall pay the option price of the shares of Common Stock in full in
cash at the time of exercise or, with the consent of the Compensation Committee,
in whole or in part in (i) Common Stock valued at fair market value on the
exercise date or (ii) Restricted Stock based on the fair market value of the
Restricted Stock on the exercise date.
Term of 1995 Plan Stock Option. The term of each 1995 Plan Stock Option
shall be ten years from the date such option was granted. In the case of an ISO
granted to a Ten Percent Holder, the term shall be five years from the date of
grant.
Termination of Employment. In the event that a Participant's employment is
terminated by reason of death, any 1995 Plan Stock Option or SAR granted to such
Participant may be exercised, to the extent exercisable at the time of death or
otherwise permitted by the Compensation Committee, by the Participant's
transferee or legal representative for the earlier of six months from the date
of death or the expiration of the term of such option or SAR. Moreover, in the
event that a Participant's employment is terminated by reason of disability or
retirement, any unexercised 1995 Plan Stock Option or SAR granted to such
Participant may be exercised, to the extent exercisable at time of termination
or otherwise permitted by the Compensation Committee, for the earlier of three
months from the date of such termination or the expiration of the term of such
option or SAR. If a Participant's employment is terminated for any reason other
than death, disability or retirement, all unexercised 1995 Employee Stock
Options or SARs awarded to the Participant terminate as of such termination
date.
In the event that a Participant's employment is terminated by reason of
death, disability, retirement, or otherwise, any Deferred Stock or Restricted
Stock granted to such Participant is subject to the terms of the corresponding
Deferred Stock agreement or Restricted Stock agreement, respectively.
Rights of Participants. Nothing in the Amended 1995 Employee Plan, any
Award or agreement related thereto shall confer upon any Participant any right
to continued employment with the Company, its subsidiaries or affiliates, nor
interfere with the right of the Company or a subsidiary to terminate the
employment of any Participant at any time.
Non-Assignability. No Award shall be transferable otherwise than by will or
the laws of descent and distribution; provided, however, that 1995 Plan Stock
Options (other than ISOs) may be pledged, assigned or transferred (i) during the
Participant's lifetime by such Participant to certain members of his or her
family, certain
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trusts for their benefit and certain corporations, partnerships and other
entities of which such family members own, directly or indirectly, all of the
equity interests in such entity (each, a "Permitted Transferee"), (ii) by a
Permitted Transferee to another Permitted Transferee or (iii) as otherwise
permitted by the Compensation Committee; provided, further, that any such
transfer shall comply with all terms and conditions established by the
Compensation Committee.
Adjustments Upon Changes in Capitalization. In the event of a
reorganization, merger, consolidation, recapitalization, spin-off, split-off,
split-up, issuance of stock rights, stock dividend, combination of shares, stock
split or any other change in the corporate structure of the Company affecting
the Common Stock, or any distribution to stockholders other than a cash
dividend, the Board of Directors shall make the adjustments in the number and
kind of shares authorized by the Amended 1995 Employee Plan and any adjustments
to outstanding Awards as it determines appropriate. No fractional shares of
Common Stock shall be issued in connection with an Award pursuant to any such
adjustment.
Amendment and Termination of the Amended 1995 Employee Plan. The Board of
Directors may amend, suspend or terminate the Amended 1995 Employee Plan at any
time. Termination of the Amended 1995 Employee Plan shall not affect Awards
outstanding under such plan at the time of termination.
Expiration. Unless terminated earlier by the Board of Directors, the
Amended 1995 Employee Plan shall terminate on the date immediately preceding the
tenth anniversary of its effective date.
Certain Federal Income Tax Consequences. The following description of
certain income tax consequences of the Amended 1995 Employee Plan is based upon
current statutes, regulations and interpretations and does not include state or
local income tax consequences. This description is for general informational
purposes only and is not intended to address specific tax consequences that may
be applicable to a Participant who receives an Award based on his or her
particular circumstances.
Deferred Stock
--------------
A Participant realizes no taxable income and the Company is not entitled to
a deduction when a Deferred Stock award is made. When the deferral period for
the award ends and the shares of Common Stock are delivered to the Participant,
the Participant will realize ordinary income equal to the fair market value of
the shares at that time, and, provided the applicable conditions of Section
162(m) of the Code are met (see discussion below), the Company will be entitled
to a corresponding deduction. A Participant's tax basis in shares of Common
Stock delivered at the end of a deferral period will be equal to the fair market
value of such shares when delivered to the Participant. Upon sale of the shares,
the Participant will realize short-term or long-term capital gain or loss
(assuming the shares are held as a capital asset), depending upon whether the
shares have been held for more than one year at the time of sale. Such gain or
loss will be equal to the difference between the amount realized upon the sale
of the shares and the tax basis of the shares in the Participant's hands.
Amounts paid with respect to dividends on the Deferred Stock during the deferral
period will likewise be treated as compensation income when received by the
Participant.
Restricted Stock
----------------
Shares of Restricted Stock received pursuant to awards under which the
Participant may forfeit the shares to the Company upon certain events (such as
the Participant's voluntary termination of employment during the restriction
period or the failure to meet certain performance goals) will be considered
subject to a substantial risk of forfeiture for federal income tax purposes. If
a Participant who receives such shares of Restricted Stock does not make the
election described below pursuant to Section 83(b) of the Code, the Participant
realizes no taxable income when the shares of Restricted Stock are deposited in
escrow for the benefit of the Participant and the Company is not entitled to a
deduction. When the forfeiture restrictions with respect to the Restricted Stock
lapse, the Participant will realize ordinary income equal to the fair market
value of the shares at that time, and, provided the applicable conditions of
Section 162(m) of the Code are met, the Company will be entitled to a
corresponding
8
<PAGE>
deduction. Dividends paid with respect to shares of Restricted Stock for which
no Section 83(b) election has been made will be treated as compensation income
received by the Participant. A Participant's tax basis in shares of Restricted
Stock for which no Section 83(b) election has been made will be equal to their
fair market value when the forfeiture restrictions lapse, and the Participant's
holding period for the shares will begin when the forfeiture restrictions lapse.
Upon sale of the shares, the Participant will realize short-term or long-term
capital gain or loss (assuming the shares are held as a capital asset),
depending upon whether the shares have been held for more than one year at the
time of sale. Such gain or loss will be equal to the difference between the
amount realized upon the sale of the shares and the tax basis of the shares in
the Participant's hands.
Participants receiving shares of Restricted Stock that are subject to a
substantial risk of forfeiture may, instead, make an election under Section
83(b) of the Code with respect to the shares (a "Section 83(b) election"). By
making a Section 83(b) election, the Participant elects to realize compensation
income with respect to the shares when the shares are placed in escrow for the
benefit of the Participant rather than at the time the forfeiture restrictions
lapse. The amount of such compensation income will be equal to the fair market
value (determined without regard to restrictions other than those which will
lapse) of the shares when such shares are placed in escrow for the benefit of
the Participant, and the Company will be entitled to a corresponding
compensation deduction at that time (subject to any applicable limitations under
Section 162(m) of the Code). By making a Section 83(b) election, the Participant
will realize no additional compensation income with respect to the shares when
the forfeiture restrictions lapse, and will instead recognize gain or loss with
respect to the shares when they are sold. Dividend payments received with
respect to shares of Restricted Stock for which a Section 83(b) election has
been made will be treated as dividend income, assuming the Company has adequate
current or accumulated earnings and profits. The Participant's tax basis in the
shares with respect to which a Section 83(b) election is made will be equal to
their fair market value (determined without regard to restrictions other than
those which will lapse) when placed in escrow for the benefit of the
Participant, and the Participant's holding period for such shares begins at that
time. If, however, the shares are subsequently forfeited to the Company, the
Participant will not be entitled to claim a loss with respect to the shares to
the extent of the income realized by the Participant upon the making of the
Section 83(b) election. To make a Section 83(b) election, a Participant must
file an appropriate form of election with the Internal Revenue Service and with
his or her employer, each within 30 days after shares of Restricted Stock are
placed in escrow for the benefit of the Participant, and the Participant must
also attach a copy of his or her election to his or her federal income tax
return for the year in which the shares are received.
Non-Qualified Options
---------------------
A Participant realizes no taxable income and the Company is not entitled to
a deduction when a Non-Qualified Option is granted. Upon exercise of a
Non-Qualified Option, a Participant will realize ordinary income (even if the
Non-Qualified Option has been transferred to a Permitted Transferee) equal to
the excess of the fair market value of the shares received over the exercise
price of the Non-Qualified Option, and, provided the applicable conditions of
Section 162(m) of the Code are met, the Company will be entitled to a
corresponding deduction. A holder's tax basis in the shares of Common Stock
received upon exercise of a Non-Qualified Option will be equal to the fair
market value of such shares on the exercise date, and the holder's holding
period for such shares will begin at that time. Upon sale of the shares of
Common Stock received upon exercise of a Non-Qualified Option, the holder will
realize short-term or long-term capital gain or loss (assuming the shares are
held as a capital asset), depending upon whether the shares have been held for
more than one year. The amount of such gain or loss will be equal to the
difference between the amount realized in connection with the sale of the
shares, and the holder's tax basis in such shares.
Under the Amended 1995 Employee Plan, Non-Qualified Options may, with the
consent of the Compensation Committee, be exercised in whole or in part with
shares of Common Stock held by the holder. Although a Participant will recognize
compensation income in connection with such an exercise as described above, the
holder will recognize no gain or loss with respect to the shares of Common Stock
surrendered, and the equivalent number of shares received will have a tax basis
equal to the tax basis of the surrendered shares. Shares of Common Stock
received in excess of the number of shares surrendered will have a tax basis
equal to their fair market value on the date of the exercise of the
Non-Qualified Option.
9
<PAGE>
ISOs
----
A Participant realizes no taxable income and the Company is not entitled to
a deduction when an ISO is granted or exercised. Provided the Participant meets
the applicable holding period requirements for the shares received upon exercise
of an ISO (two years from the date of grant of the ISO and one year from the
date of exercise of the ISO), gain or loss realized by a Participant upon sale
of the shares received upon exercise of an ISO will be long-term capital gain or
loss (assuming the shares are held as a capital asset), and the Company will not
be entitled to a deduction. If, however, the Participant disposes of the shares
before meeting the applicable holding period requirements (a "disqualifying
disposition"), the Participant will realize ordinary income at that time equal
to the excess of the amount realized upon such disposition (or, if less, the
fair market value of the shares at the time of exercise of the ISO) over the
exercise price of the ISO, and the Company will be entitled to a corresponding
deduction (subject to any applicable limitations under Section 162(m) of the
Code). Any amount realized upon a disqualifying disposition of the shares in
excess of the fair market value of the shares on the exercise date of the ISO
will be treated as capital gain (assuming the shares are held as a capital
asset) and will be treated as long-term capital gain if the shares have been
held for more than one year.
Under the Amended 1995 Employee Plan, ISOs may, with the consent of the
Compensation Committee, be exercised in whole or in part with shares of Common
Stock held by the Participant. The Participant will recognize no gain or loss
with respect to the shares of Common Stock surrendered (assuming the surrender
of the previously-owned shares does not constitute a disqualifying disposition
of those shares), and the equivalent number of shares received will have a tax
basis equal to the tax basis of the surrendered shares. Shares of Common Stock
received in excess of the number of shares surrendered will have a tax basis of
zero (assuming the applicable holding period for those shares continues to be
met).
SARs
----
A Participant realizes no taxable income and the Company is not entitled to
a deduction when a SAR is granted. Upon exercising a SAR, a Participant will
realize ordinary income in an amount equal to the cash or the fair market value
of the stock received (assuming such shares are not Restricted Stock or Deferred
Stock subject to the rules described above) and, provided the applicable
conditions of Section 162(m) are met, the Company will be entitled to a
corresponding deduction.
Section 162(m) Limitations on Compensation Deductions
-----------------------------------------------------
Pursuant to Section 162(m) of the Code, a publicly-held corporation may be
denied a deduction for compensation paid in any one taxable year in excess of $1
million to a "covered employee" unless the compensation properly qualifies as
"performance based compensation" subject to certain requirements. A covered
employee for this purpose is the chief executive officer of the corporation and
each of the four other most highly compensated officers of the corporation, as
reported to shareholders under the Securities Exchange Act of 1934, as amended.
The Company expects that grants of Awards to persons who may be covered
employees will meet the applicable requirements for performance based
compensation and that, as a result, compensation that is otherwise deductible
under the Code will not be subject to limitation under Section 162(m) of the
Code.
Withholding
-----------
Participants shall be responsible to make appropriate provision for all
taxes required to be withheld in connection with any Award, the exercise thereof
and the transfer of shares of Common Stock pursuant to the Amended 1995 Employee
Plan. Such responsibility shall extend to all applicable Federal, state, local
or foreign withholding taxes. In the case of the payment of Awards in Common
Stock or the exercise of 1995 Plan Stock Options or SARs, the Company shall, at
the election of the Participant, have the right to retain the number of shares
of Common Stock whose fair market value equals the withholding tax obligation of
such Participant.
10
<PAGE>
New Plan Benefits Table. The benefits to be awarded under the Amended 1995
Employee Plan are not determinable. However, the Amended 1995 Employee Plan is
substantially similar to the Original 1995 Employee Plan. Information regarding
stock options awarded during the fiscal year 1996 to certain executive officers
of the Company under the Original 1995 Employee Plan is included under the
heading Stock Options - Options Granted in this proxy statement.
The Board of Directors recommends that stockholders vote FOR this proposal
to adopt the Amended and Restated 1995 Stock-Based Incentive Compensation Plan.
PROPOSAL NO. 5
APPROVAL OF THE 1997 DIRECTORS STOCK OPTION PLAN
The Board of Directors has adopted, subject to stockholder approval, the
1997 Directors Stock Option Plan (the "1997 Directors Plan"). The 1997 Directors
Plan provides for the granting of Non-Qualified Options (the "1997 Directors
Options") to acquire up to approximately 50,000 shares of Common Stock to
non-employee directors of the Company. On March 18, 1997, the last reported
sales price of the Common Stock on the New York Stock Exchange was $24.875.
Currently, five of the seven members of the Board of Directors are eligible to
receive awards under the 1997 Directors Plan.
The Company believes that the 1997 Directors Plan will assist the Company
in attracting and retaining the services of experienced and knowledgeable
independent directors and provide additional incentives for such independent
directors to continue to work for the best interests of the Company and its
stockholders through continuing ownership of Common Stock.
Summary of the 1997 Directors Plan
The following summary describes features of the 1997 Directors Plan. This
summary is qualified in its entirety by reference to the specific provisions of
the 1997 Directors Plan, the full text of which is set forth as Appendix C.
Purpose. The purpose of the 1997 Directors Plan is to assist the Company in
attracting and retaining services of experienced and knowledgeable independent
directors of the Company for the benefit of the Company and its stockholders and
provide additional incentives for such independent directors to continue to work
for the best interests of the Company and its stockholders through continuing
ownership of Common Stock.
Administration. The 1997 Directors Plan shall be administered by a
committee of two or more persons designated by the Board of Directors (the
"Directors Plan Committee"), each of whom shall be a director of the Company and
an employee of the Company or any subsidiary of the Company and therefore shall
not be eligible to participate in the 1997 Directors Plan. The Directors Plan
Committee shall have full power to interpret and administer the 1997 Directors
Plan, full authority to act in determining the terms and conditions of 1997
Directors Options and the power to adopt regulations, and amend such
regulations, for carrying out the 1997 Directors Plan, including, without
limitation, the power, unilaterally and without approval of a plan participant,
to amend, in certain circumstances, an existing 1997 Directors Option; provided,
however, that any amendment must comply with the requirements of the 1997
Directors Plan and the rules and regulations promulgated by the Securities and
Exchange Commission under Rule 16b-3 of the Securities Exchange Act of 1934, as
amended.
Eligibility. All members of the Board of Directors who are not employees of
the Company or a subsidiary ("Non-Employee Directors") on the business day
immediately following the Company's Annual Meeting of Stockholders for calendar
years 1997, 1998, 1999, 2000 and 2001 (each, a "Grant Date"), beginning with the
1997 Annual Meeting, shall be eligible to participate in the 1997 Directors
Plan.
11
<PAGE>
Grant of Options. Awards under the 1997 Directors Plan shall consist of the
grant from the Company to each Non-Employee Director who is in office on a Grant
Date of an option to purchase 2,000 shares of Common Stock. The 1997 Directors
Options will vest ratably over a three (3) year period.
Exercise Price. The exercise price for 1997 Directors Options shall be
equal to the fair market value of a share of Common Stock on the Grant Date. If
the Common Stock is publicly traded, then the fair market value per share on any
Grant Date shall be the closing price of actual sales of shares of Common Stock
on the principal national securities exchange on which the Common Stock is
listed, or if not listed, as reported on the National Association of Securities
Dealers Automated Quotation System, on such date or, if the Common Stock was not
traded or reported on such date, on the last preceding day on which the Common
Stock was traded or reported.
Form of Consideration. The 1997 Directors Plan permits payment for shares
issued upon exercise of a 1997 Directors Option to be made in cash or, with the
consent of the Directors Plan Committee and if not prohibited by the Company's
and its subsidiaries' financing agreements, in Common Stock owned by such
Non-Employee Director for at least six (6) months, or such shorter period as the
Directors Plan Committee may determine, valued at its fair market value on the
date of exercise.
Term of Option. The term of each 1997 Directors Option shall be ten (10)
years.
Termination of Membership on Board of Directors. If a Non-Employee Director
ceases to be a member of the Board of Directors for any reason prior the date on
which a Directors Plan Option becomes fully vested, the shares of Common Stock
subject to such option which are not vested shall be forfeited and such
Non-Employee Director shall not have further rights to exercise such option.
Moreover, a person is eligible for a grant of a 1997 Directors Option only if he
or she is serving as a Non-Employee Director on the applicable Grant Date.
Non-Assignability. No option shall be transferable otherwise than by will
or the laws of descent and distribution; provided, however, that 1997 Directors
Options may be pledged, assigned or transferred (i) during the Non-Employee
Director's lifetime by such director to certain members of his or her family,
certain trusts for their benefit and certain corporations, partnerships and
other entities of which such family members own, directly or indirectly, all of
the equity interests in such entity (each, a "Permitted Transferee"), (ii) by a
Permitted Transferee to another Permitted Transferee or (iii) as otherwise
permitted by the Directors Plan Committee; provided, further, that any such
transfer shall comply with all terms and conditions established by the Directors
Plan Committee.
Adjustments Upon Changes in Capitalization. In the event that the Common
Stock changes by reason of any stock dividend, spin-off, recapitalization, stock
split or combination or exchange of shares, merger, reorganization or
consolidation in which the Company is the surviving company, reclassification or
change in par value or any other extraordinary or unusual event affecting the
outstanding Common Stock without the Company's receipt of consideration, or if
the value of outstanding shares of the Common Stock is substantially reduced as
a result of a spin-off or the Company's payment of an extraordinary dividend or
distribution, the maximum number of shares of Common Stock available for the
1997 Directors Options, the number of shares covered by outstanding 1997
Directors Options, the kind of shares issued under the 1997 Directors Plan and
the exercise price per share of each 1997 Directors Option may be adjusted by
the Directors Plan Committee to preclude, to the extent possible, the
enlargement or dilution of rights and benefits under such 1997 Directors
Options. Any fractional shares resulting from such adjustment shall be
eliminated.
Amendment and Termination of the 1997 Directors Plan. The Board of
Directors may amend or terminate the 1997 Directors Plan at any time. No such
action by the Board of Directors shall materially impair a grantee's rights
under a previously granted 1997 Directors Option unless the grantee consents or
the Directors Plan Committee acts to remain in compliance with all applicable
laws and approvals of governmental or regulatory agencies. Termination of the
1997 Directors Plan shall not impair the Directors Plan Committee's power and
authority with respect to an outstanding 1997 Directors Option. Whether or not
the 1997 Directors Plan has terminated, the Directors Plan Committee may
terminate or amend an outstanding 1997 Directors Option upon the agreement
between the Company and the grantee or to remain in compliance with all
applicable laws and approvals of governmental or regulatory agencies.
12
<PAGE>
Expiration. Unless terminated or extended earlier, the 1997 Directors Plan
shall terminate on the day immediately preceding the tenth anniversary of its
effective date.
Certain Federal Income Tax Consequences. The following description of
certain income tax consequences of the 1997 Directors Plan is based on current
statutes, regulations and interpretations and does not include state or local
income tax consequences. This description is for general informational purposes
only and is not intended to address specific tax consequences that may be
applicable to a Non-Employee Director who receives a 1997 Directors Option based
on his or her particular circumstances.
All 1997 Directors Options to be granted under the 1997 Directors Plan are
intended not to qualify as "incentive stock options" as that term is defined in
Section 422 of the Code. Neither the Non-Employee Director nor the Company will
incur any federal income tax consequences as a result of the grant of a 1997
Directors Option under the 1997 Directors Plan. Upon the exercise of a 1997
Directors Option, the difference between the exercise price and the fair market
value of the shares on the date of exercise will be taxable as ordinary income
to the Non-Employee Director (even if the 1997 Directors Option has been
transferred to a Permitted Transferee).
At the time of a subsequent sale of any shares of Common Stock obtained
upon the exercise of a 1997 Directors Option under the 1997 Directors Plan, any
gain or loss will be a capital gain or loss to the 1997 Directors Option holder.
The 1997 Directors Option holder's tax basis in such stock for purposes of
determining capital gain or loss will be the exercise price paid pursuant to the
1997 Directors Option plus the amount of ordinary income recognized on exercise
of the 1997 Directors Option. Any capital gain or loss recognized on a
subsequent sale of Common Stock will be a long-term gain or loss if the sale
occurs more than one year after the date of exercise and a short-term capital
gain or loss if the sale occurs one year or less after the date of exercise.
The Company will be entitled to a deduction for federal income tax purposes
at the same time and in the same amount that the holder of any option recognizes
ordinary income, to the extent that such income is considered reasonable
compensation under the Code.
New Plan Benefits Table. The following table sets forth the number of
options to be granted to the Non-Employee Directors under the 1997 Directors
Plan in fiscal year 1997.
Name and Position Number of Options
----------------- -----------------
Keith E. Alessi, Director 2,000
Bruce C. Bruckmann, Director 2,000
Michael A. Delaney, Director 2,000
Gregory B. Maffei, Director 2,000
James A. Urry, Director 2,000
The Board of Directors recommends that stockholders vote FOR this proposal
to approve the 1997 Directors Stock Option Plan.
13
<PAGE>
Security Ownership of Certain Beneficial Owners and Directors and Officers
The following table sets forth certain information with respect to
beneficial ownership of Common Stock as of March 14, 1997 by (i) each of the
Company's directors and certain of its executive officers, (ii) each person who
is known by the Company to own beneficially more than 5% of the Company's common
stock and (iii) by all of the Company's directors and executive officers as a
group. The Company owns all of the issued and outstanding capital stock of CORT
Furniture Rental Corporation (CFR).
<TABLE>
<CAPTION>
Common Stock(1)
--------------------------------------
Number of Shares Percentage of Class
---------------- -------------------
<S> <C> <C>
Directors:
Bruce C. Bruckmann............................ 162,739(2) 1.3%
Paul N. Arnold................................ 147,762(2) 1.1%
Charles M. Egan............................... 35,982(2) *
Keith E. Alessi............................... 44,993(2) *
Gregory B. Maffei............................. 35,192(2) *
James A. Urry................................. 23,737(2) *
Michael A. Delaney............................ 7,209(2) *
Certain Executive Officers:
Lloyd Lenson.................................. 103,420(2) *
Kenneth W. Hemm............................... 79,516(2) *
Steven D. Jobes............................... 55,729(2) *
Frances Ann Ziemniak.......................... 45,574(2) *
Five Percent Stockholders:(3)
Citicorp Venture Capital, Ltd.(4)............. 5,778,518 45.2%
399 Park Avenue, 14th Floor
New York, New York 10043
The Kaufmann Fund, Inc........................ 900,000 7.0%
140 East 45th Street, 43rd Floor
New York, New York 10017
All Directors and Executive Officers as a group
(16 persons).................................. 859,268(2) 6.5%
<FN>
- ----------
* Less than 1%.
(1) The Company has two authorized classes of common stock: Common Stock
(voting) and Class B Common Stock (nonvoting); however, there are no shares
of the Company's Class B Common Stock issued or outstanding.
(2) Includes shares under option of 1,334; 100,756; 20,168; 1,334; 1,667;
1,334; 1,334; 48,674; 22,617; 52,379; 23,597 for Messrs. Bruckman, Arnold,
Egan, Alessi, Maffei, Urry, Delaney, Lenson, Hemm, Jobes and Ms. Ziemniak,
respectively, and 367,422 in total for all Directors and Executive Officers
as a group.
(3) The Board of Directors and Management are not aware of any other person or
entity who holds beneficially more than 5% of the outstanding Common Stock
of the Corporation.
(4) CVC is a party to an agreement with the Company, dated March 30, 1993,
pursuant to which CVC is required by April 1, 1999 (or such later date as
the Small Business Administration may approve) to reduce (by conversion to
non-voting stock or other disposition) its ownership of the Company's
Common Stock (voting) to a percentage at which CVC will no longer be
presumed to have control of the Company under regulations of the Small
Business Administration. In general, the presumption of control exists so
long as a person holds 20% or more of the issuer's outstanding voting
common stock.
</FN>
</TABLE>
14
<PAGE>
Board of Directors
The Corporation's Board of Directors held five meetings during fiscal year
1996. All of the directors attended more than 75% of the meetings of the Board
of Directors and the Committees of the Board of Directors on which they served,
except Gregory B. Maffei with respect to the Audit Committee, and Michael A.
Delaney with respect to the Board of Directors and Compensation Committee.
Directors who are not employees of the Company or Citicorp Venture Capital
Ltd. ("CVC") receive a monthly payment of $1,000, $500 for attendance at each
meeting of the Board of Directors and $500 for attendance at each meeting of a
committee of the Board of Directors and are reimbursed for expenses incurred in
connection with attendance at meetings of the Board of Directors or committees
thereof. In addition, directors not employed by the Company were entitled to
receive options for common stock pursuant to the 1995 Directors Stock Option
Plan (the "Directors Plan").
The Company adopted the Directors Plan, which provides for the granting of
stock options on a non-discretionary basis to non-employee directors of the
Company. An aggregate of 50,000 shares of common stock have been reserved for
issuance under the Directors Plan. The Directors Plan provided for automatic
grants of an option to purchase shares of common stock to non-employee directors
on November 15, 1995 and 1996, which options will become exercisable over time.
The option exercise price was equal to 100% of the fair market value of the
common stock on the date of grant of the option. Options granted to directors
under the Directors Plan will be treated as nonstatutory stock options under the
Internal Revenue Code, as amended. The Company granted 10,000 options in 1996
pursuant to the terms of the Directors Plan.
Committees of the Board
The standing Committees of the Board of Directors are the Audit,
Compensation and Directors Stock Option Committees.
The Audit Committee recommends the independent accountants to conduct the
annual audit of the books and accounts of the Corporation, and reviews the
adequacy of the Corporation's financial reporting, accounting systems and
controls. The Audit Committee also evaluates the Corporation's internal and
external auditing procedures. During fiscal year 1996, the Audit Committee,
which currently consists of Messrs. Alessi, Chairman; Bruckmann, and Maffei,
held two meetings.
The Compensation Committee reviews and approves salary and other
compensation of officers and administers certain benefit plans. The Compensation
Committee also has the authority to administer, grant and award stock options
under the Corporation's stock option plans. The Committee held four meetings
during fiscal year 1996. Current members of the Committee are Messrs. Urry,
Chairman; Bruckmann, and Delaney.
The Directors Stock Option Committee administers the Directors Plan. The
Committee held no meetings during fiscal year 1996. Current members of the
committee are Messrs. Arnold and Egan.
Report of the Compensation Committee of the
Board of Directors on Executive Compensation
Role of Committee. The Compensation Committee of the Board of Directors
(the "Committee") establishes, oversees and directs executive compensation
policies of the Company and administers the Company's stock option plans. The
Committee seeks to align executive compensation with Company objectives and
strategies, management programs, business financial performance and enhanced
stockholder value. The Committee consists of independent outside directors, none
of whom is or was an officer or employee of the Company or CFR.
The Committee's objectives include (i) attracting and retaining exceptional
individuals as executive officers and (ii) providing key executives with
motivation to perform to the full extent of their abilities in an effort to
maximize Company performance to deliver enhanced value to the Company's
stockholders. The Committee seeks to place a greater percentage of executive
officers' compensation at risk, as compared to non-executives, by tying
15
<PAGE>
compensation directly to the performance of the business and value of the Common
Stock. Executive compensation consists primarily of an annual salary, bonuses
linked to the performance of the Company and long-term equity-based
compensation.
Compensation. The annual salaries of the Company's executive officers are
set at levels designed to attract and retain exceptional individuals by
rewarding them for individual and Company achievements. The Committee reviews
the annual salary of each executive officer in relation to such officer's
performance and previous salaries and general market and industry conditions or
trends and makes appropriate adjustments. In the future, the Committee plans to
review executive officers' salaries annually and to adjust such salaries based
on each executive officer's past performance, expected future contributions, the
scope and nature of responsibilities of, including changes in such
responsibilities, and competitive compensation data relating to such executive
officer.
The Committee believes that a portion of the executives' compensation
should be tied to the financial results of the Company in order to reward
individual performance and overall Company success. Each fiscal year,
challenging Company financial performance and individual strategic and operating
objectives and targets are established for each officer. Typical targets include
earnings, revenue, and return on assets. A portion of the bonus is based upon
subjective criteria particular to each officer's individual operating
responsibilities. In 1996, the Company and the executive officers exceeded these
goals. Accordingly, Messrs. Arnold, Hemm, Jobes and Lenson and Ms. Ziemniak
earned bonuses attributable to their respective Company financial performance
and individual strategic and operating objectives and targets.
The Company has employee stock option plans in order to offer key employees
the opportunity to acquire an equity interest in the Company, thereby aligning
the interests of these employees more closely with the long term interests of
stockholders. Awards under these employee stock option plans may be in the form
of options, deferred stock, restricted stock or stock appreciation rights.
Options, which have a fixed exercise price and vest over a five-year period,
were granted to executive officers and other key employees in 1994 and 1995. In
late 1995 and 1996, the Company granted options to executive officers which vest
over a three-year period and have an exercise price equal to the market value of
the Common Stock on the date of grant.
1996 Chief Executive Officer Compensation. The Committee determined the
1996 compensation of Mr. Arnold, President and Chief Executive Officer, in
accordance with the above discussion. In addition, the Committee based Mr.
Arnold's bonus on his overall leadership and management of the Company, and his
efforts through the acquisition of Evans Rents and the public offering of the
Common Stock in July 1996.
Deductibility of Compensation. Section 162(m) of the Internal Revenue Code
imposes a $1 million limit on the deductibility of compensation paid to
executive officers of public companies. The Committee believes that all of the
compensation awarded to the Company's executive officers will be fully
deductible in accordance with this limit.
COMPENSATION COMMITTEE
James A. Urry, Chairman
Bruce C. Bruckmann
Michael A. Delaney
16
<PAGE>
Stockholder Return Performance Graph
The following graph compares the percentage change in cumulative total
stockholder return on the Company's Common Stock against the cumulative total
return of the Standard & Poor's 500 Index and the Dow Jones Other Industrial and
Commercial Services Index from the initial public offering price on November 17,
1995 to December 31, 1996. Cumulative total return to stockholders is measured
by dividing (x) the sum of (i) total dividends for the period (assuming dividend
reinvestment) plus (ii) per-share price change for the period by (y) the share
price at the beginning of the period. The graph is based on an investment of
$100 at the initial public offering price on November 17, 1995 in the Common
Stock and in each index.
[GRAPH INSERTED HERE CONTAINING THE INFORMATION BELOW:]
11/17/95 12/95 12/96
-------- ----- -----
Cort Business Services Corporation .......... $100 $138 $172
S&P 500 ..................................... $100 $103 $126
Dow Jones and Other Industrial
& Commercial Services ....................... $100 $101 $111
17
<PAGE>
Executive Compensation
The following table sets forth, for the fiscal years ended December 31,
1994, 1995, and 1996, certain information regarding the cash compensation paid
by the Company, as well as certain other compensation paid or accrued for those
years, to each of the five most highly compensated executive officers of the
Company, in all capacities in which they served:
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
------------
Annual Compansation Securities
Name and --------------------------- Other Annual Underlying All Other
Principal Position Year Salary Bonus(1) Compensation(2) Options Compensation(3)
- ------------------ ---- ------ -------- --------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Paul N. Arnold 1996 $223,750 $167,813 -- 2,850 $11,781
President & Chief Executive 1995 210,000 145,593 -- 128,467 8,983
Officer 1994 189,306 113,454 -- 101,971 8,279
Kenneth W. Hemm 1996 132,764 86,363 -- 2,850 24,161
Group Vice President 1995 125,591 74,639 -- 67,667 20,836
1994 117,573 69,070 -- 53,669 19,477
Steven D. Jobes 1996 119,287 77,536 -- 2,850 --
Vice President, Marketing, 1995 116,707 68,306 -- 35,117 --
Merchandising, Sales and 1994 109,218 55,937 -- 53,669 967
National Accounts
Lloyd Lenson 1996 129,988 74,964 -- 2,850 5,193
Group Vice President 1995 125,678 61,852 -- 43,167 5,323
1994 118,723 60,701 -- 67,086 4,213
Frances Ann Ziemniak(4) 1996 120,400 78,260 $132,153 2,850 15,916
Vice President of Finance, 1995 88,593 51,676 -- 43,430 --
Chief Financial Officer and
Assistant Secretary
<FN>
- ----------
(1) The amounts shown consist of cash bonuses earned in the fiscal year
identified but paid in the subsequent fiscal year.
(2) In 1996, the Company made payments to reimburse moving expenses ($74,820)
and to cover applicable taxes on reimbursed moving expenses ($57,333).
(3) The Company maintains an investment and profit-sharing defined contribution
retirement plan. All of the Company's employees are eligible to participate
after one year of service. The Company makes a matching contribution as a
percentage of the employee contributions. The Company may, at its
discretion, make additional contributions based on the Company's
performance. The amounts shown include both the matching contribution and
the Company's discretionary payment on behalf of the named executives in
which all of the above, except Ms. Ziemniak, are fully vested. In addition,
the amounts shown include the amounts allocated to certain management
employees in the defined contribution portion of the CORT Furniture Rental
Supplemental Executive Retirement Plan. The Company contributes a fixed
dollar amount per plan member with the total contribution allocated among
all plan members on the basis of their age and years of service.
(4) Ms. Ziemniak was hired in March 1995.
</FN>
</TABLE>
18
<PAGE>
Stock Options
Options Granted
The following table sets forth information regarding stock options granted
under the 1995 Stock-Based Incentive Compensation Plan (the "1995 Plan") during
the fiscal year 1996 to the named executive officers of the Company:
Option Grants in 1996
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
----------------------------------------------- Value at Assumed
Number of Annual Rates of Stock
Securities Percent of Total Price Appreciation
Underlying Options Granted For Option Term(2)
Options to Employees in Exercise Price Expiration ---------------------
Name Granted(1) Fiscal Year (per share) Date 5% 10%
- ---- ---------- ---------------- -------------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Paul N. Arnold 2,850 2.2% $20.75 12/18/06 $37,191 $94,250
Kenneth W. Hemm 2,850 2.2% $20.75 12/18/06 37,191 94,250
Steven D. Jobes 2,850 2.2% $20.75 12/18/06 37,191 94,250
Lloyd Lenson 2,850 2.2% $20.75 12/18/06 37,191 94,250
Frances Ann Ziemniak 2,850 2.2% $20.75 12/18/06 37,191 94,250
<FN>
- ----------
(1) Options under the 1995 Plan are exercisable when vested.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10%, compounded
annually from the date the respective options were granted to their
expiration date and are not presented to forecast possible future
appreciation, if any, in the Common Stock. The potential realizable values
shown are net of the option exercise price, but do not include deductions
for taxes or other expenses associated with the exercise of the options or
the sale of the underlying shares. The actual realizable values, if any, on
the stock option exercises will depend on the future performance of the
Common Stock, the optionee's continued employment through applicable
vesting periods and the date on which the options are exercised.
</FN>
</TABLE>
The following table sets forth information regarding 1996 year-end option
values for the named executive officers of the Company:
Aggregated 1996 Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Options at Fiscal Year End at Fiscal Year End
on Value ---------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul N. Arnold -- -- 100,756 79,550 $1,590,472 $661,538
Kenneth W. Hemm 18,084 $195,542 22,617 39,016 449,360 331,932
Steven D. Jobes 15,000 284,868 52,379 22,683 945,812 171,060
Lloyd Lenson -- -- 48,674 22,683 863,602 171,060
Fran Ziemniak -- -- 23,597 22,683 352,663 171,060
</TABLE>
19
<PAGE>
Supplemental Executive Retirement Plan
The CORT Furniture Rental Supplemental Executive Retirement Plan (the "SERP
Plan") provides a supplement to the retirement benefits that certain key
management employees will receive from the Retirement Plan for Salaried and
Sales Employees of Mohasco Corporation (the "Mohasco Plan") and the CORT
Furniture Rental Investment Savings and Profit Sharing Retirement Plan (the
"401(k) Plan"). The SERP Plan consists of a defined benefit plan and a defined
contribution plan.
Certain key management employees of the Company with at least five years of
service (employment) have been selected by the Board of Directors as
participants in the defined benefit portion of the SERP Plan. Such officers
include Messrs. Arnold, Lenson and Jobes. The defined SERP Plan benefits are a
function of service with the Company and Final Average Compensation (average
monthly compensation during the 36 consecutive months out of the last 60 months
of the participant's employment that produce the highest average). Compensation
includes salary, bonuses and 401(k) Plan salary deferrals. Benefits are equal to
a targeted percentage as determined by the Board of Directors upon selection of
the employee to participate in the SERP Plan--(55% in the case of Mr. Arnold and
50% in the case of Mr. Jobes and Mr. Lenson) of the Final Average Compensation
as of the date of the participant's retirement or termination of employment
multiplied by the ratio of the participant's actual years of service as of the
applicable event to the participant's years of service projected to the
participant's Normal Retirement Date (first day of the month after the date the
participant attains age 65). The benefits are reduced by (i) the annuity value
of Company contributions made on behalf of the participant to the 401(k) Plan
and (ii) the annuity benefit, on a single life basis only, payable to the
participant under the Mohasco Plan.
The estimated annual benefits payable upon retirement, expressed as a
straight life annuity, before reduction for the 401(k) Plan or the Mohasco Plan,
are as follows:
TARGETED PERCENTAGE: 55%
Years of Service
------------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
$125,000 $ 65,528 $ 65,528 $ 65,528 $ 65,528 $ 65,528
150,000 78,634 78,634 78,634 78,634 78,634
175,000 91,739 91,739 91,739 91,739 91,739
200,000 104,845 104,845 104,845 104,845 104,845
225,000 117,951 117,951 117,951 117,951 117,951
250,000 131,056 131,056 131,056 131,056 131,056
300,000 157,268 157,268 157,268 157,268 157,268
400,000 209,690 209,690 209,690 209,690 209,690
450,000 235,901 235,901 235,901 235,901 235,901
500,000 262,113 262,113 262,113 262,113 262,113
20
<PAGE>
TARGETED PERCENTAGE: 50%
Years of Service
------------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
$125,000 $ 59,571 $ 59,571 $ 59,571 $ 59,571 $ 59,571
150,000 71,485 71,485 71,485 71,485 71,485
175,000 83,399 83,399 83,399 83,399 83,399
200,000 95,314 95,314 95,314 95,314 95,314
225,000 107,228 107,228 107,228 107,228 107,228
250,000 119,142 119,142 119,142 119,142 119,142
300,000 142,971 142,971 142,971 142,971 142,971
400,000 190,627 190,627 190,627 190,627 190,627
450,000 214,456 214,456 214,456 214,456 214,456
500,000 238,284 238,284 238,284 238,284 238,284
As of December 31, 1996, Mr. Arnold was credited with 28 years of service,
Mr. Jobes with 25 years of service and Mr. Lenson with 18 years of service.
Other key management employees have been selected by the Board of Directors
as participants in the defined contribution portion of the SERP Plan. Such
officers include Mr. Hemm and Ms. Ziemniak. Defined contribution benefits are
equal to the balance in an executive's SERP Account (the annual contribution
credited to such executive's account, adjusted to reflect gains, losses or
forfeitures incurred), as of the last day of the month in which the executive is
employed.
A participant in either the defined benefit or defined contribution portion
of the SERP Plan whose employment with the Company is terminated without Cause
(i.e., other than as a result of willful gross misconduct materially or
demonstrably injurious to the Company or willful refusal to perform
substantially the duties reasonably assigned to him/her) or who has a
substantial reduction in duties and responsibilities or in compensation will
vest immediately in his SERP Plan benefit. In addition, such a participant
(other than the Chief Executive Officer) will be entitled to receive a lump sum
payment equal to the amount of compensation he/she received during the final six
or 12 months based on length of service (12 months in the case of Messrs.
Arnold, Hemm, Jobes and Lenson and six months in the case of Ms. Ziemniak) prior
to such event. The Chief Executive Officer is entitled to a severance payment of
twice this amount. Amounts paid by the Company under any employment agreement or
other severance arrangement will reduce the severance payment under the SERP
Plan. In addition, the Company and Mr. Arnold have agreed that one-half of such
severance payment will be paid in a lump sum and the remaining half will be paid
in eighteen equal monthly installments commencing one month after the date of
his termination. Each participant in the SERP Plan has agreed not to compete
with the Company for a period of 18 months following the termination of his/her
employment with the Company unless such participant's employment was terminated
without Cause.
21
<PAGE>
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Based solely on review of the copies of the forms furnished to the Company,
or written representations that no form was required to be filed, the Company
believes that during the fiscal year ended December 31, 1996, all Section 16(a)
filing requirements applicable to its officers, directors and beneficial owners
of more than ten percent of the Company's Common Stock were satisfied; except
that Victoria Stiles failed to file timely her initial report on Form 3.
Employment Agreements
The Company has entered into employment agreements with Paul N. Arnold,
dated December 27, 1976, as amended on July 24, 1992 and August 18, 1993;
Kenneth W. Hemm, dated October 6, 1980; Steven D. Jobes dated August 1, 1984 and
Lloyd Lenson, dated April 27, 1987. Each of these agreements provides for a
minimum base salary and prohibits the Company from terminating the employee for
an initial period of time ranging from one to two years from the date of such
agreement. Thereafter, the Company may terminate any of these employees upon two
to six months' written notice or payment of two to six months' base salary.
However, the Company may terminate any of these employees without regard to the
minimum period of employment or the notice of severance payment requirements for
certain acts or omissions by such employee. Each of the employees has agreed not
to compete with the Company in a specified territory and not to disclose any
confidential information for periods ranging from one to two years following
termination of his employment with the Company.
Equity Share Agreement
Pursuant to an Equity Share Agreement dated April 20, 1994 (the
"Agreement") entered into in conjunction with the Company's relocation of one of
its Group Vice Presidents, the Company loaned such officer, Lloyd Lenson, and
his wife Eileen S. Lenson (collectively, "Lenson") the principal amount of
$225,000 (the "Loan Amount") to facilitate the purchase of a single family
dwelling in California. The Agreement provides that upon the occurrence of the
earliest of one of several specified events (a "Termination Event") Lenson will
repay the Loan Amount to the Company as adjusted pursuant to the Agreement.
Adjustment will be made to reflect the Agreement's grant to the Company of a
proportionate interest in any change of value between the total purchase price
of the house, as defined in the Agreement, and the fair market value of the
house on the date of the Termination Event.
1998 Stockholder Proposals
In the event that a stockholder desires to have a proposal included in the
proxy statement for the 1998 Annual Meeting of the Stockholders, the proposal
must be received by the Corporation in writing on or before December 1, 1997, by
certified mail, return receipt requested, and must comply in all respects with
applicable rules and regulations of the Securities and Exchange Commission, the
laws of the state of Delaware and the Corporation's By-Laws relating to such
inclusion. Stockholder proposals may be mailed to the Corporate Secretary, CORT
Business Services Corporation, 4401 Fair Lakes Court, Suite 300, Fairfax,
Virginia 22033.
OTHER BUSINESS
The Board of Directors and Management know of no matters to be presented at
the meeting other than those set forth in this proxy statement. However, if any
other business is properly brought before the meeting or any adjournment
thereof, the proxy holders will vote in regard thereto according to their
discretion insofar as such proxies are not limited to the contrary.
By order of the Board of Directors.
FRANCES ANN ZIEMNIAK
Assistant Secretary
22
<PAGE>
APPENDIX A
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
An amendment to the following section of the Company's Restated Certificate
of Incorporation is reflected below by printing additions in boldface and
deleted material in brackets:
1. The first sentence of the first paragraph of Article Four of the
Restated Certificate of Incorporation of the Company is hereby amended
in its entirety to read as follows:
"The aggregate number of shares of stock which the Corporation
shall have authority to issue is 40,000,000 [31,000,000] shares,
divided into two (2) classes consisting of: 20,000,000 [15,500,000]
shares of Common Stock, par value $.01 per share ("Common Stock") and
20,000,000 [15,500,000] shares of Class B Common Stock, par value $.01
per share ("Class B Common Stock")."
<PAGE>
APPENDIX B
AMENDED AND RESTATED
CORT BUSINESS SERVICES CORPORATION
1995 STOCK-BASED INCENTIVE COMPENSATION PLAN
Date Adopted: July 25, 1995
Date Amended: ____ __, 199_
<PAGE>
AMENDED AND RESTATED
CORT BUSINESS SERVICES CORPORATION
1995 STOCK-BASED INCENTIVE COMPENSATION PLAN
1. Purpose of the Plan
-------------------
The purpose of the Plan is to assist the Company, its Subsidiaries and
Affiliates in attracting and retaining valued employees by offering them a
greater stake in the Company's success and a closer identity with it, and to
encourage ownership of the Company's stock by such Employees.
2. Definitions
-----------
2.1 "Affiliate" means any entity other than the Subsidiaries in which
the Company has a substantial direct or indirect equity interest, as
determined by the Board.
2.2 "Award" means an award of Deferred Stock, Restricted Stock,
Options or SARs under the Plan.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Common Stock" means the Class A Common Stock of the Company, par
value $.01 per share, or such other class or kind of shares or other
securities resulting from the application of Section 10.
2.6 "Company" means CORT Business Services Corporation, a Delaware
corporation, or any successor corporation.
2.7 "Committee" means the committee designated by the Board to
administer the Plan under Section 4. The Committee shall have at least
three members, each of whom shall be a member of the Board, a Non-Employee
Director and an Outside Director.
2.8 "Deferred Stock" means an Award made under Section 6 of the Plan
to receive Common Stock at the end of a specified Deferral Period.
2.9 "Deferral Period" means the period during which the receipt of a
Deferred Stock Award under Section 6 of the Plan will be deferred.
<PAGE>
2.10 "Effective Date" shall have the meaning ascribed to such term in
Section 11 of the Plan.
2.11 "Employee" means an officer or other key employee of the Company,
a Subsidiary or an Affiliate including a director who is such an employee.
2.12 "Fair Market Value" means on any given date, the value per share
of the Common Stock as determined by the Committee if the Common Stock is
not traded in a public market, and, if the Common Stock is traded in a
public market, shall be, if the Common Stock is listed on a national
securities exchange or included in the NASDAQ Stock Market National Market
System, the last reported sale price thereof on such date, or, if the
Common Stock is not so listed or included, the mean between the last
reported "bid" and "asked" prices thereof on such date, as reported on
NASDAQ or, if not so reported, as reported by the National Daily Quotation
Bureau, Inc. or as reported in the customary financial reporting service,
as applicable and as the Committee determines.
2.13 "Grantee" means an Employee to whom an Option is granted.
2.14 "Holder" means a Grantee or a Permitted Transferee, as
applicable.
2.15 "Incentive Stock Option" means an Option intended to meet the
requirements of an incentive stock option as defined in section 422 of the
Code and designated as an Incentive Stock Option.
2.16 "1934 Act" means the Securities Exchange Act of 1934, as amended.
2.17 "Non-Employee Director" shall have the meaning given to such term
in Rule 16b-3.
2.18 "Non-Qualified Option" means an Option not intended to be an
Incentive Stock Option, and designated as a Non-Qualified Option.
2.19 "Option" means any stock option granted from time to time under
Section 8 of the Plan.
-2-
<PAGE>
2.20 "Outside Director" means a member of the Board who: (i) is not a
current employee of the Company, its Subsidiaries or Affiliates; (ii) is
not a former employee of the Company, its Subsidiaries or Affiliates who
receives during the year compensation for prior services with the Company,
its Subsidiaries or Affiliates (other than benefits under a tax-qualified
retirement plan); (iii) has not been an officer of the Company, its
Subsidiaries or Affiliates; and (iv) does not receive any remuneration from
the Company, its Subsidiaries or Affiliates (either directly or indirectly)
in any capacity other than as director. The requirements of this Section
shall be interpreted and applied in a manner consistent with the
requirements of Treasury Regulation ss. 1.162-27(e)(3).
2.21 "Performance Goals" means a goal that must be met by the end of a
period specified by the Committee (but that is substantially uncertain to
be met before the grant of the Award) based upon: (i) the price of Common
Stock, (ii) the market share of the Company, its Subsidiaries or Affiliates
(or any business unit thereof), (iii) sales by the Company, its
Subsidiaries or Affiliates (or any business unit thereof), (iv) earnings
per share of Common Stock, (v) return on shareholder equity of the Company,
or (vi) costs of the Company, its Subsidiaries or Affiliates (or any
business unit thereof).
2.22 "Permitted Transferee" means the spouse, parents, siblings,
children or grandchildren (in each case, natural or adopted) of a Grantee,
any trust for his or her benefit or the benefit of his or her spouse,
parents, siblings, children or grandchildren (in each case, natural or
adopted), or any corporation or partnership in which the direct and
beneficial owner of all of the equity interest in such corporation or
partnership is such individual Grantee or Permitted Transferee (or any
trust for the benefit of such persons).
2.23 "Plan" means the CORT Business Services Corporation 1995
Stock-Based Incentive Compensation Plan herein set forth, as amended from
time to time.
2.24 "Restricted Stock" means Common Stock awarded by the Committee
under Section 7 of the Plan.
-3-
<PAGE>
2.25 "Restriction Period" means the period during which Restricted
Stock awarded under Section 7 of the Plan is subject to forfeiture.
2.26 "Rule 16b-3" means Rule 16b-3, or any successor thereto,
promulgated by the Securities and Exchange Commission under the 1934 Act.
2.27 "SAR" means a stock appreciation right awarded by the Committee
under Section 9 of the Plan.
2.28 "Retirement" means retirement from the active employment of the
Company, a Subsidiary or an Affiliate pursuant to the relevant provisions
of the applicable pension plan of such entity or as otherwise determined by
the Board.
2.29 "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company (or any
subsequent parent of the Company) if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
2.30 "Ten Percent Stockholder" means a person who on any given date
owns, either directly or indirectly (taking into account the attribution
rules contained in section 424(d) of the Code), stock possessing more than
10% of the total combined voting power of all classes of stock of the
Company or a Subsidiary.
3. Eligibility
-----------
Any Employee is eligible to receive an Award.
4. Administration and Implementation of Plan
-----------------------------------------
4.1 The Plan shall be administered by the Committee, which shall have
full power to interpret and administer the Plan and full authority to act
in selecting the Employees to whom Awards will be granted, in determining
the type and amount of Awards to be granted to each such Employee, the
terms and conditions of Awards granted under the Plan and the terms of
agreements which will be entered into with Holders,
-4-
<PAGE>
so long as such terms, conditions and agreements are not otherwise
inconsistent with the Plan.
4.2 The Committee's powers shall include, but not be limited to, the
power to determine whether, to what extent and under what circumstances an
Option may be exchanged for cash, Restricted Stock, Deferred Stock or some
combination thereof; to determine whether, to what extent and under what
circumstances an Award is made and operates on a tandem basis with other
Awards made hereunder; to determine whether, to what extent and under what
circumstances Common Stock or cash payable with respect to an Award shall
be deferred, either automatically or at the election of the Holder
(including the power to add deemed earnings to any such deferral); to
determine the effect, if any, of a change in control of the Company upon
outstanding Awards; and to grant Awards (other than Incentive Stock
Options) that are transferable by the Grantee.
4.3 The Committee shall have the power to adopt regulations for
carrying out the Plan and to make changes in such regulations not
inconsistent with the Plan as it shall, from time to time, deem advisable.
The Committee shall have the power unilaterally and without approval of a
Holder to amend an existing Award in order to carry out the purposes of the
Plan so long as such an amendment does not take away any benefit granted to
a Holder by the Award and as long as the amended Award comports with the
terms of the Plan and Rule 16b-3. Any interpretation by the Committee of
the terms and provisions of the Plan and the administration thereof, and
all action taken by the Committee, shall be final and binding on Holders.
4.4 The Committee may condition the grant of any Award or the lapse of
any Deferral or Restriction Period (or any combination thereof) upon the
Grantee's achievement of a Performance Goal that is established by the
Committee before the grant of the Award. The Committee shall have
discretion to determine the specific targets with respect to various
categories of Performance Goals set forth in the definition thereof. Before
granting an Award or permitting the lapse of any Deferral or Restriction
Period subject to this Section, the Committee shall certify that an
individual has satisfied the applicable Performance Goal.
-5-
<PAGE>
5. Shares of Stock Subject to the Plan
-----------------------------------
5.1 Subject to adjustment as provided in Section 10, the total number
of shares of Common Stock available for Awards under the Plan shall be
1,210,000 shares.
5.2 The maximum number of Awards that may be awarded to any Employee
shall not exceed 363,000 shares during the term of the Plan (the
"Individual Limit"). Subject to Section 5.3 and Section 10, any Award that
is cancelled or repriced by the Committee shall count against the
Individual Limit. Notwithstanding the foregoing, the Individual Limit may
be adjusted to reflect the effect on Awards of any transaction or event
described in Section 10.
5.3 Any shares of Common Stock issued by the Company shall reduce the
shares of Common Stock available for Awards under the Plan and shall be
counted against the Individual Limit. Any shares of Common Stock issued
hereunder may consist, in whole or in part, of authorized and unissued
shares or treasury shares of Common Stock. If any shares of Common Stock
subject to any Award granted hereunder are forfeited or such Award
otherwise terminates without the issuance of such shares or the payment of
other consideration in lieu of such shares, the shares subject to such
Award, to the extent of any such forfeiture or termination, shall again be
available for Awards under the Plan.
6. Deferred Stock
--------------
An Award of Deferred Stock is an agreement by the Company to deliver to the
Holder a specified number of shares of Common Stock at the end of a specified
Deferral Period. Such an Award shall be subject to the following terms and
conditions.
6.1 Deferred Stock Awards shall be evidenced by Deferred Stock
agreements. Such agreements shall conform to the requirements of the Plan
and may contain such other provisions as the Committee shall deem
advisable.
6.2 Upon determination of the number of shares of Deferred Stock to be
awarded to a Holder, the Committee shall direct that the same be credited
to the Holder's account on the books of the Company but that issuance and
delivery of the same shall be deferred until the date or dates provided in
Section 6.5 hereof.
-6-
<PAGE>
Prior to issuance and delivery hereunder the Holder shall have no rights as
a stockholder with respect to any shares of Deferred Stock credited to the
Holder's account.
6.3 Amounts equal to any dividends declared during the Deferral Period
with respect to the number of shares covered by a Deferred Stock Award will
be paid to the Holder currently, or deferred and deemed to be reinvested in
additional Deferred Stock, or otherwise reinvested on such terms as are
determined at the time of the Award by the Committee, in its sole
discretion, and specified in the Deferred Stock agreement.
6.4 The Committee may condition the grant of an Award of Deferred
Stock or the expiration of the Deferral Period upon the Grantee's
achievement of one or more Performance Goal(s) specified in the Deferred
Stock agreement. If the Grantee fails to achieve the specified Performance
Goal(s), the Committee shall not grant the Deferred Stock Award to the
Holder, or the Holder shall forfeit the Award and no Common Stock shall be
transferred to him pursuant to the Deferred Stock Award. Dividends paid
during the Deferral Period on Deferred Stock subject to a Performance Goal
shall be reinvested in additional Deferred Stock and the lapse of the
Deferral Period for such Deferred Stock shall be subject to the Performance
Goal(s) previously established by the Committee.
6.5 The Deferred Stock agreement shall specify the duration of the
Deferral Period taking into account Grantee's termination of employment on
account of death, disability, Retirement or other cause. The Deferral
Period may consist of one or more installments. At the end of the Deferral
Period or any installment thereof the shares of Deferred Stock applicable
to such installment credited to the account of a Holder shall be issued and
delivered to the Holder (or, where appropriate, the Holder's legal
representative) in accordance with the terms of the Deferred Stock
agreement. The Committee may, in its sole discretion, accelerate the
delivery of all or any part of a Deferred Stock Award or waive the deferral
limitations for all or any part of a Deferred Stock Award.
7. Restricted Stock
----------------
An Award of Restricted Stock is a grant by the Company of a specified
number of shares of Common Stock to the Holder, which shares are subject to
forfeiture upon the happening of specified events.
-7-
<PAGE>
Such an Award shall be subject to the following terms and conditions:
7.1 Restricted Stock shall be evidenced by Restricted Stock
agreements. Such agreements shall conform to the requirements of the Plan
and may contain such other provisions as the Committee shall deem
advisable.
7.2 Upon determination of the number of shares of Restricted Stock to
be granted to the Holder, the Committee shall direct that a certificate or
certificates representing the number of shares of Common Stock be issued to
the Holder with the Holder designated as the registered owner. The
certificate(s) representing such shares shall be legended as to sale,
transfer, assignment, pledge or other encumbrances during the Restriction
Period and deposited by the Holder, together with a stock power endorsed in
blank, with the Company, to be held in escrow during the Restriction
Period.
7.3 During the Restriction Period the Holder shall have the right to
receive dividends from and to vote the shares of Restricted Stock.
7.4 The Committee may condition the grant of an Award of Restricted
Stock or the expiration of the Restriction Period upon the Grantee's
achievement of one or more Performance Goal(s) specified in the Restricted
Stock agreement. If the Grantee fails to achieve the specified Performance
Goal(s), the Committee shall not grant the Restricted Stock to the Holder,
or the Holder shall forfeit the Award of Restricted Stock and the Common
Stock shall be forfeited to the Company.
7.5 The Restricted Stock agreement shall specify the duration of the
Restriction Period and the performance, employment or other conditions
(including termination of employment on account of death, disability,
Retirement or other cause) under which the Restricted Stock may be
forfeited to the Company. At the end of the Restriction Period the
restrictions imposed hereunder shall lapse with respect to the number of
shares of Restricted Stock as determined by the Committee, and the legend
shall be removed and such number of shares delivered to the Holder (or,
where appropriate, the Holder's legal representative). The Committee may,
in its sole discretion, modify or accelerate the vesting and delivery of
shares of Restricted Stock.
-8-
<PAGE>
8. Options
--------
Options give an Employee the right to purchase a specified number of shares
of Common Stock from the Company for a specified time period at a fixed price.
Options may be either Incentive Stock Options or Non-Qualified Stock Options.
The grant of Options shall be subject to the following terms and conditions:
8.1 Option Grants: Options shall be evidenced by Option agreements.
Such agreements shall be uniform and not inconsistent with the requirements
of the Plan, and may contain such other provisions as the Committee shall
deem advisable.
8.2 Option Price: The price per share at which Common Stock may be
purchased upon exercise of an Option shall be determined by the Committee,
but, in the case of grants of Incentive Stock Options, shall be not less
than the Fair Market Value of a share of Common Stock on the date of grant.
In the case of any Incentive Stock Option granted to a Ten Percent
Stockholder, the option price per share shall not be less than 110% of the
Fair Market Value of a share of Common Stock on the date of grant. The
option price per share for Non-Qualified Options may be less than the Fair
Market Value of a share of Common Stock on the date of grant.
8.3 Term of Options: The Option agreements shall specify when an
Option may be exercisable and the terms and conditions applicable thereto.
The term of an Option shall in no event be greater than ten (10) years
(five (5) years in the case of an Incentive Stock Option granted to a Ten
Percent Stockholder) and no Option may be exercisable sooner than six
months from date of grant.
8.4 Incentive Stock Options: Each provision of the Plan and each
Option agreement relating to an Incentive Stock Option shall be construed
so that each Incentive Stock Option shall be an incentive stock option as
defined in section 422 of the Code, and any provisions of the Option
agreement thereof that cannot be so construed shall be disregarded. In no
event may a Holder be granted an Incentive Stock Option which does not
comply with the grant and vesting limitations prescribed by section 422(d)
of the Code. Incentive Stock Options may not be granted to employees of
Affiliates.
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<PAGE>
8.5 Restrictions on Transferability: No Incentive Stock Option shall
be transferable otherwise than by will or the laws of descent and
distribution and, during the lifetime of the Grantee, shall be exercisable
only by the Grantee. Upon the death of a Grantee, the person to whom the
rights have passed by will or by the laws of descent and distribution may
exercise an Incentive Stock Option only in accordance with this Section 8.
8.6 Payment of Option Price: The option price of the shares of Common
Stock upon the exercise of an Option shall be paid in full in cash at the
time of the exercise or, with the consent of the Committee, in whole or in
part in Common Stock valued at Fair Market Value on the date of exercise.
With the consent of the Committee, payment upon the exercise of a
Non-Qualified Option may be made in whole or in part by Restricted Stock
(based on the fair market value of the Restricted Stock on the date the
Option is exercised, as determined by the Committee). In such case the
Common Stock to which the Option relates shall be subject to the same
forfeiture restrictions originally imposed on the Restricted Stock
exchanged therefor.
8.7 Termination by Death: If a Grantee's employment by the Company, a
Subsidiary or Affiliate terminates by reason of death, any Option granted
to such Grantee (whether held by such Grantee or a subsequent Holder) may
thereafter be exercised (to the extent such Option was exercisable at the
time of death or on such accelerated basis as the Committee may determine
at or after grant) by, where appropriate, a subsequent Holder, if any, the
Holder's transferee or legal representative, for a period of six (6) months
from the date of death or until the expiration of the stated term of the
Option, whichever period is shorter.
8.8 Termination by Reason of Retirement or Disability: If a Grantee's
employment by the Company, a Subsidiary or Affiliate terminates by reason
of disability (as determined by the Committee) or Retirement, any
unexercised Option granted to the Grantee (whether held by such Grantee or
a subsequent Holder) may thereafter be exercised by the Holder (or, where
appropriate, the Holder's transferee or legal representative), to the
extent it was exercisable at the time of termination or on such accelerated
basis as the Committee may determine at or after grant, for a period of
three (3) months from the date of such termination of employment or until
the
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<PAGE>
expiration of the stated term of the Option, whichever period is shorter.
8.9 Other Termination: If a Grantee's employment by the Company,
Subsidiary or Affiliate terminates for any reason other than death,
disability or Retirement, all unexercised Options awarded to the Grantee
(whether held by such Grantee or a subsequent Holder) shall terminate on
the date of such termination of employment.
9. Stock Appreciation Rights
-------------------------
SARs give the Holder the right to receive, upon exercise of the SAR, the
increase in the Fair Market Value of a specified number of shares of Common
Stock from the date of grant of the SAR to the date of exercise. The grant of
SARs shall be subject to the following terms and conditions:
9.1 SARs are rights to receive a payment in cash, Common Stock,
Restricted Stock or Deferred Stock as selected by the Committee. The value
of these rights, which are determined by the appreciation in the number of
shares of Common Stock subject to the SAR, shall be evidenced by SAR
agreements. Such agreements shall conform to the requirements of the Plan
and may contain such other provisions as the Committee shall deem
advisable. An SAR may be granted in tandem with all or a portion of a
related Option under the Plan ("Tandem SAR"), or may be granted separately
("Freestanding SAR"). A Tandem SAR may be granted either at the time of the
grant of the Option or at any time thereafter during the term of the Option
and shall be exercisable only to the extent that the related Option is
exercisable. In no event shall any SAR be exercisable within the first six
(6) months of its grant.
9.2 The base price of a Tandem SAR shall be the option price under the
related Option. The base price of a Freestanding SAR shall be not less than
one hundred percent (100%) of the Fair Market Value of the Common Stock, as
determined by the Committee, on the date of grant of the Freestanding SAR.
9.3 A SAR shall entitle the recipient to receive a payment equal to
the excess of the Fair Market Value of the shares of Common Stock covered
by the SAR on the date of exercise over the base price of the SAR. Such
payment may be in cash, shares of Common Stock, Deferred Stock, Restricted
Stock or any
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<PAGE>
combination, as the Committee shall determine. Upon exercise of a Tandem
SAR as to some or all of the shares of Common Stock covered by the grant,
the related Option shall be cancelled automatically to the extent of the
number of shares of Common Stock covered by such exercise, and such shares
shall no longer be available for purchase under the Option pursuant to
Section 8. Conversely, if the related Option is exercised as to some or all
of the shares of Common Stock covered by the grant, the related Tandem SAR,
if any, shall be cancelled automatically to the extent of the number of
shares of Common Stock covered by the Option exercised.
9.4 SARs shall be subject to the same terms and conditions applicable
to Options as stated in sections 8.3, 8.5, 8.7, 8.8, 8.9. SARs shall also
be subject to such other terms and conditions not inconsistent with the
Plan as shall be determined by the Committee.
10. Adjustments upon Changes in Capitalization
------------------------------------------
In the event of a reorganization, recapitalization, stock split, spin-off,
split-off, split-up, stock dividend, issuance of stock rights, combination of
shares, merger, consolidation or any other change in the corporate structure of
the Company affecting Common Stock, or any distribution to stockholders other
than a cash dividend, the Board shall make appropriate adjustment in the number
and kind of shares authorized by the Plan and any adjustments to outstanding
Awards as it determines appropriate. No fractional shares of Common Stock shall
be issued in connection with an Award hereunder pursuant to such an adjustment.
The Fair Market Value of any fractional shares resulting from adjustments
pursuant to this Section shall be paid in cash to the Holder.
11. Effective Date, Termination and Amendment
-----------------------------------------
The Plan, as amended, shall become effective on May 14, 1997 (the
"Effective Date"), subject to stockholder approval. The Plan shall remain in
full force and effect until the earlier of ten (10) years from the Effective
Date, or the date it is terminated by the Board. The Board shall have the power
to amend, suspend or terminate the Plan at any time.
Termination of the Plan pursuant to this Section 11 shall not affect Awards
outstanding under the Plan at the time of termination.
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<PAGE>
12. Transferability
---------------
Except as provided below, Awards may not be pledged, assigned or
transferred for any reason during the Holder's lifetime, and any attempt to do
so shall be void and the relevant Award shall be forfeited; provided, however
that each Non-Incentive Stock Option may be pledged, assigned or transferred (i)
during the Grantee's lifetime by the Grantee to a Permitted Transferee, (ii) by
a Permitted Transferee to another Permitted Transferee or (iii) as otherwise
permitted by the Committee; provided, further, that any such transfer shall
comply with all terms and conditions established by the Committee and any term,
condition or restriction contained in the agreement entered into with the
Holder. Any transferee of the Holder, including, but not limited to any
Permitted Transferee, shall, in all cases, be subject to the provisions of the
agreement between the Company and the Holder.
13. General Provisions
------------------
13.1 Nothing contained in the Plan, or any Award granted pursuant to
the Plan, shall confer upon any Employee any right with respect to
continuance of employment by the Company, a Subsidiary or Affiliate, nor
interfere in any way with the right of the Company, a Subsidiary or
Affiliate to terminate the employment of any Employee at any time.
13.2 For purposes of this Plan, transfer of employment between the
Company and its Subsidiaries and Affiliates shall not be deemed termination
of employment.
13.3 Holders shall be responsible to make appropriate provision for
all taxes required to be withheld in connection with any Award, the
exercise thereof and the transfer of shares of Common Stock pursuant to
this Plan. Such responsibility shall extend to all applicable Federal,
state, local or foreign withholding taxes. In the case of the payment of
Awards in the form of Common Stock, or the exercise of Options or SARs, the
Company shall, at the election of the Holder, have the right to retain the
number of shares of Common Stock whose Fair Market Value equals the amount
to be withheld in satisfaction of the applicable withholding taxes.
Agreements evidencing such Awards shall contain appropriate provisions to
effect withholding in this manner.
-13-
<PAGE>
13.4 Without amending the Plan, Awards may be granted to Employees who
are foreign nationals or employed outside the United States or both, on
such terms and conditions different from those specified in the Plan as
may, in the judgment of the Committee, be necessa or desirable to further
the purpose of the Plan.
13.5 To the extent that Federal laws (such as the 1934 Act, the Code
or the Employee Retirement Income Security Act of 1974) do not otherwise
control, the Plan and all determinations made and actions taken pursuant
hereto shall be governed by the law of Delaware and construed accordingly.
13.6 The Committee may amend any outstanding Awards to the extent it
deems appropriate. Such amendment may be made by the Committee without the
consent of the Holder, except in the case of amendments adverse to the
Holder, in which case the Holder's consent is required to any such
amendment.
13.7 The Plan, as amended and restated in its entirety herein,
replaces and supersedes all prior versions of the Plan.
-14-
<PAGE>
APPENDIX C
CORT BUSINESS SERVICES CORPORATION
1997 DIRECTORS STOCK OPTION PLAN
Adopted:
<PAGE>
CORT BUSINESS SERVICES CORPORATION
1997 DIRECTORS STOCK OPTION PLAN
1. Purpose of the Plan.
--------------------
The purpose of the Plan is to assist the Company and its Subsidiaries in
attracting and retaining services of experienced and knowledgeable independent
directors of the Company for the benefit of the Company and its stockholders and
to provide additional incentives for such independent directors to continue to
work for the best interests of the Company and its stockholders through
continuing ownership of its common stock.
2. Definitions
-----------
2.01 "1934 Act" means the Securities Exchange Act of 1934, as amended.
2.02 "Board" means the Board of Directors of the Company.
2.03 "Cause" shall have the meaning given to such term in Section
7.04.
2.04 "Code" means the Internal Revenue Code of 1986, as amended.
2.05 "Committee" means the committee designated by the Board to
administer the Plan under Section 5. The Committee shall have at least two
members, each of whom shall be a member of the Board and shall not be an
Eligible Director.
2.06 "Common Stock" means the Company's Common Stock, $.01 par value
per share, or such other class or kind of shares or other securities
resulting from the application of Section 8.
2.07 "Company" means CORT Business Services Corporation, a Delaware
corporation, or any successor corporation.
2.08 "Eligible Director" means each director of the Company who is not
otherwise an employee of the Company or any Subsidiary.
2.09 "Fair Market Value" means, on any given date, the closing price
of actual sales of shares of Common Stock on the principal national
securities exchange on which the Common Stock is listed, or if not listed,
as reported on the National Association of Securities Dealers Automated
Quotation System, on such date or, if the Common Stock was not traded or
reported on such date, on the last preceding day on which the Common Stock
was traded or reported.
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<PAGE>
2.10 "Grant" shall have the meaning given to such term in Section 3 of
the Plan.
2.11 "Grantee" means an Eligible Director to whom an Option is
granted.
2.12 "Holder" means an Eligible Director or a Permitted Transferee, as
applicable.
2.13 "Loan Exercise" shall have the meaning given to such term in
Section 5.02.
2.14 "Mature Common Stock" means Common Stock owned for six (6) months
or more, or such other period as the Committee may determine subject to
applicable accounting regulations, by the respective Holder.
2.15 "Option" means a non-qualified stock option granted from time to
time under Section 3 of the Plan.
2.16 "Option Exercise Period" means, with respect to shares of Common
Stock related to any Grant, the period commencing when the shares of Common
Stock granted pursuant to an Option vest and ending ten years (10) from the
date of such Grant.
2.17 "Permitted Transferee" means the spouse, parents, siblings,
children or grandchildren (in each case, natural or adopted) of a Grantee,
any trust for his or her benefit or the benefit of his or her spouse,
parents, siblings, children or grandchildren (in each case, natural or
adopted), or any corporation, limited liability company, partnership or
similar entity in which the direct and beneficial owner of all of the
equity interest in such corporation, limited liability company, partnership
or similar entity is such individual Grantee or Permitted Transferee (or
any trust for the benefit of such persons).
2.18 "Plan" means the CORT Business Services Corporation 1997
Directors Stock Option Plan herein set forth, as it may be amended from
time to time.
2.19 "Rule 16b-3" means Rule 16b-3, or any successor rule, promulgated
by the SEC under the 1934 Act.
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<PAGE>
2.20 "SEC" means the Securities and Exchange Commission, or any
successor entity.
2.21 "Share Delivery Exercise" shall have the meaning given to such
term in Section 5.02.
2.22 "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company (or any
subsequent parent of the Company) if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
3. Eligibility; Grant of Option
----------------------------
An Option to acquire 2,000 shares of Common Stock shall be granted (each a
"Grant") to each Eligible Director on the business day immediately following the
Company's Annual Meeting of Stockholders for calendar years 1997, 1998, 1999,
2000 and 2001, beginning with the 1997 Annual Meeting, subject to approval of
the Plan by the stockholders of the Company.
4. Vesting and Forfeitures
-----------------------
4.01 A Holder shall become vested as to one-third of the shares of
Common Stock covered by the Option awarded under each Grant on the first
anniversary of such Grant, as to two-thirds of the shares of Common Stock
covered by the Option awarded under each Grant on the second anniversary of
such Grant and as to all of the shares of Common Stock related to the
Option awarded under each Grant on the third anniversary of such Grant.
4.02 If a Grantee shall cease being a director of the Company for any
reason prior to the date on which any Option awarded hereunder is fully
vested, the shares subject to such Option which are not vested shall be
forfeited and the Holder shall have no further rights to exercise the
Option with respect to such unvested shares.
5. Administration and Implementation of Plan
-----------------------------------------
5.01 The Plan shall be administered by the Committee, which shall have
full power to interpret and administer the Plan and full authority to act
in determining such terms and conditions of Options granted under the Plan
which are not otherwise inconsistent with the Plan.
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<PAGE>
5.02 The Committee's powers shall include, but not be limited to, the
power: (a) to establish an arrangement through registered broker-dealers
whereby temporary financing may be made available to a Holder by the
broker-dealer, under the rules and regulations of the Federal Reserve
Board, for the purpose of assisting the Holder in the exercise of an
Option; (b) to establish procedures at the Committee's discretion, and if
not prohibited by the restrictions in the Company's and its Subsidiaries'
financing agreements, for a Holder (i) to have withheld from the total
number of shares to be acquired upon the exercise of an Option that number
of shares having a Fair Market Value, which, together with such cash as
shall be paid in respect of fractional shares, shall equal the minimum
statutory tax withholding obligation incurred by the Holder upon such
exercise, or (ii) to exercise an Option by delivering a number of shares of
Mature Common Stock owned by such Holder having a Fair Market Value that
shall equal the option exercise price and/or the tax withholding obligation
incurred by the Holder upon such exercise (a "Share Delivery Exercise");
and (c) to establish a loan program, or to cause its Subsidiaries to
establish a loan program, if not prohibited by the restrictions in the
Company's and Subsidiaries' financing agreements, to loan to a Holder who
is a director of the Company at the time of exercise an amount sufficient
to satisfy the exercise price and/or tax obligation incurred by the Holder
upon such exercise and thereafter loan promptly to such Holder such
additional amounts sufficient to pay further withholding obligations as may
be determined from time to time to be payable as a result of such exercise
(a "Loan Exercise"). Any amounts loaned to such Holder shall be evidenced
by a promissory note from such Holder having such terms and conditions as
are mutually agreed to by the Committee and the Holder; provided, however,
that such loan shall bear a market rate of interest and shall not limit the
recourse of the lender to any particular assets of the Holder.
5.03 The Committee shall have the power to adopt regulations for
carrying out the Plan and to make changes in such regulations not
inconsistent with the Plan as it shall, from time to time, deem advisable.
The Committee shall have the power unilaterally and without approval of a
Holder to amend an existing Option in order to carry out the purposes of
the Plan so long as such amendment does not take
-4-
<PAGE>
away any benefit granted to a Holder by the Option and as long as the
amended Option is not inconsistent with the Plan and Rule 16b-3. Any
interpretation by the Committee of the terms and provisions of the Plan and
the administration thereof, and all action taken by the Committee, shall be
final and binding on Holders.
6. Shares of Common Stock Subject to the Plan
------------------------------------------
6.01 Subject to adjustment as provided in Section 8, the total number
of shares of Common Stock available for Options under the Plan shall be
50,000 shares of Common Stock.
6.02 The grant of an Option shall reduce the shares of Common Stock as
to which Options may be granted by the number of shares subject to such
Option. Any shares issued hereunder may consist, in whole or in part, of
authorized and unissued shares or treasury shares of Common Stock. If any
shares subject to any Option granted hereunder are forfeited or such Option
otherwise terminates without the issuance of such shares or the payment of
other consideration in lieu of such shares, the shares subject to such
Option, to the extent of any such forfeiture or termination, shall again be
available for grants of Options under the Plan. In the event there are
insufficient shares of Common Stock available for Options under the Plan to
satisfy all of the Option grants under Section 3 on the same day, such
Option grants shall be reduced pro-rata.
7. Options
-------
Options give an Eligible Director the right to purchase a specified number
of shares of Common Stock from the Company for a specified time period at a
fixed price. The grant of Options shall be subject to the following terms and
conditions:
7.01 Option Grants: Options shall be evidenced by Option award
certificates. Such certificates shall be uniform and not inconsistent with
the requirements of the Plan, and may contain such other provisions as the
Committee shall deem advisable.
7.02 Option Price: The price per share at which Common Stock may be
purchased upon exercise of an Option shall be the Fair Market Value of a
share of Common Stock on the date of grant.
-5-
<PAGE>
7.03 Exercise of Option: Subject to Section 5 of this Plan, each
Option granted under this Plan may be exercised in full at one time or in
part from time to time only during the Option Exercise Period by the giving
of written notice, signed by the Holder, to the Company stating the number
of shares of Common Stock with respect to which the Option is being
exercised, accompanied by full payment for such shares pursuant to Section
7.05 hereof.
7.04 Transfer and Exercise: No Option shall be transferable by the
Holder except by will or the laws of descent and distribution; provided,
however, that Options may be pledged, assigned or transferred (i) during
the Grantee's lifetime by the Grantee to a Permitted Transferee, (ii) by a
Permitted Transferee to another Permitted Transferee or (iii) as otherwise
permitted by the Committee; provided, further, that any such transfer shall
comply with all terms and conditions established by the Committee. In the
event of the death, retirement or any other termination of Board service of
a Grantee except for removal for Cause, the Option, if (i) the vesting of
such Option is accelerated by the Committee in its discretion or (ii)
otherwise exercisable by the Holder at the time of such termination, may be
exercised upon the earlier of (A) the end of the Option Exercise Period and
(B) within one (1) year after such termination. In the event of termination
for Cause, all previously granted Options shall be of no further force and
effect. Termination for "Cause" shall be defined as termination on account
of any act of (x) fraud or intentional misrepresentation, or (y)
embezzlement, misappropriation or conversion of assets or opportunities of
the Company or any Subsidiary.
7.05 Payment of Option Price: The Option price of the shares of Common
Stock acquired upon the exercise of an Option shall be paid in full in cash
at the time of the exercise or, with the consent of the Committee in
accordance with Section 5.02, and if not prohibited by the restrictions in
the Company's and its Subsidiaries' financing agreements, pursuant to a
Share Delivery Exercise.
-6-
<PAGE>
8. Adjustments Upon Changes in Capitalization
------------------------------------------
In the event of a reorganization, recapitalization, stock split, reverse
stock split, spin-off, split-off, split up, stock dividend, issuance of stock
rights, combination of shares, merger, consolidation or any other change in the
corporate structure of the Company affecting Common Stock, or any distribution
to stockholders in respect of stock other than a cash dividend, the Committee
shall make the adjustments in the number and kind of shares authorized by the
Plan and any adjustments to outstanding Options as it determines appropriate. No
fractional shares of Common Stock shall be issued upon exercise of an Option
pursuant to such an adjustment. The Fair Market Value of any fractional shares
resulting from adjustments pursuant to this section shall be paid in cash to the
Holder. If during the term of any Option granted hereunder the Company shall be
merged into or consolidated with or otherwise combined with a person or entity,
or there is a liquidation of the Company, then at the election of the Committee,
the Company may take such other action as the Committee shall determine to be
reasonable under the circumstances (and consistent with Rule 16b-3) to permit
the Holder to realize the value of such Option, including without limitation
paying cash to such Holder equal to the value of the Option or requiring the
acquiring corporation to grant options or stock to such Holder having a value
equal to the value of the Option.
9. Effective Date, Termination and Amendment
-----------------------------------------
The Plan shall become effective on May 14, 1997, subject to stockholder
approval. The Plan shall remain in full force and effect until the earlier of
the tenth anniversary of the date of its adoption by the Board, or the date it
is terminated by the Board. The Board shall have the power to amend the Plan or
to suspend or terminate the Plan at any time.
Termination of the Plan pursuant to this Section 9 shall not affect Options
outstanding under the Plan at the time of termination.
10. General Provisions
------------------
10.01 No Eligible Director shall have any claim or right to be granted
an Option hereunder. Neither this Plan nor any action taken hereunder shall
be construed as (i) giving any Holder any right to continue to be
affiliated with the Company, (ii) giving any Holder any equity or interest
of any kind in any
-7-
<PAGE>
assets of the Company, or (iii) creating a trust of any kind or a fiduciary
relationship of any kind between the Company and any such person. No Holder
shall have any of the rights of a stockholder with respect to shares of
Common Stock covered by an Option until such time as the Option has been
exercised and shares have been issued to such person.
10.02 Holders shall be responsible to make appropriate provision for
all taxes required to be withheld in connection with any Option, the
exercise thereof and the transfer of shares of Common Stock pursuant to
this Plan. Such responsibility shall extend to all applicable Federal,
state, local or foreign withholding taxes. In the case of the exercise of
Options, the Company shall, at the election of the Holder, but only with
the consent of the Committee, and if not prohibited by the restrictions in
the Company's and its Subsidiaries' financing agreements, have the right to
satisfy the applicable tax obligation through a Share Delivery Exercise or
a Loan Exercise.
10.03 The Company shall not be obligated to deliver certificates for
Common Stock upon the exercise of an Option unless the Holder has made
payment in full for such Common Stock required by Sections 7.02 and 7.05
and has arranged for withholding of all taxes required by Section 10.02.
10.04 Upon exercise of an Option, the Holder shall be required to make
such representations and furnish such information as may be reasonably
required by the Committee to permit the Company to issue or transfer the
shares of Common Stock in compliance with the provisions of applicable
Federal or state securities laws. The Company, in its discretion, may
postpone the issuance and delivery of shares of Common Stock upon any
exercise of an Option until completion of such registration or other
qualification of such shares under any Federal or state laws, or stock
exchange listing, as the Company may consider appropriate. The Company is
not obligated to register or qualify the shares of Common Stock issued
pursuant to Options under Federal or state securities laws and may refuse
to issue such shares if neither registration nor exemption therefrom is
practical. The Board may require that prior to the issuance or transfer of
any shares of Common Stock upon exercise of an Option, the recipient enter
into a written agreement to comply with any restrictions on subsequent
disposition that the Committee deems necessary
-8-
<PAGE>
or advisable under any applicable Federal and state securities laws.
Certificates representing the shares of Common Stock issued hereunder may
bear a restrictive legend to reflect such restrictions.
10.05 To the extent that Federal laws (such as the 1934 Act, the Code
or the Employee Retirement Income Security Act of 1974, as amended) do not
otherwise control, the Plan and all determinations made and actions taken
pursuant hereto shall be governed by the law of the State of Delaware and
construed accordingly.
-9-
<PAGE>
CORT BUSINESS SERVICES CORPORATION
The undersigned appoints Maureen C. Thune and Frances Ann Ziemniak, and each of
them, proxies of the undersigned with full power of substitution to vote all
shares of Cort Business Services Corporation the undersigned is entitled to vote
at the 1997 Annual Meeting of Stockholders to be held on May 14, 1997, at 2:00
p.m., local time or any and all adjournments or postponements thereof, with all
powers the undersigned would have if personally present.
(To Be Signed on Reverse Side.)
<PAGE>
Please mark your |
A [X] votes as in this |___
example
FOR WITHHOLD Nominees: Keith E. Alessi
1. ELECTION OF Paul N. Arnold
DIRECTORS [ ] [ ] Bruce C. Bruckmann
Michael A. Delaney
(INSTRUCTIONS: To withhold authority to vote for Charles M. Egan
any individual nominee, print that nominee's name Gregory B. Maffei
on the space provided below) James A. Urry
- -------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of appointment of KPMG
Peat Marwick LLP as independent
accountants. [ ] [ ] [ ]
3. Amendment to the Restated Certificate of
Incorporation. [ ] [ ] [ ]
4. Adoption of the Amended and Restated
1995 Stock-Based Incentive Compensation
Plan. [ ] [ ] [ ]
5. Adoption of the 1997 Directors Stock
Option Plan. [ ] [ ] [ ]
6. In his/her discretion, upon such other business as may properly come before
the Annual Meeting or any postponement or adjournment thereof.
This proxy is solicited on behalf of the Board of Directors. This proxy will be
voted as directed. In the absence of direction, this proxy will be voted for the
seven nominees for election and for proposals 2, 3, 4, and 5.
Stockholders are urged to date, mark, sign and return this proxy promptly in the
envelope provided, which requires no postage if mailed within the United States.
SIGNATURE(S): DATE: , 1997
-------------------------------------- ----------------
Note: Please sign as name appears on this proxy. When signing as an attorney,
executor, administrator, trustee or guardian, please set forth your title.
